Singapore manufacturing activity expands at faster pace in December

SINGAPORE – Manufacturing activity grew for the 18th straight month in December, amid optimism in the industry that growth will continue into this year, data out on Tuesday (Jan 4) showed.

This was despite concerns over the Omicron variant of Covid-19 and disruptions to supply chains, experts said.

The December reading of the Singapore Purchasing Managers’ Index (PMI) was at 50.7, up 0.1 point from the month before, said the Singapore Institute of Purchasing and Materials Management (SIPMM).

A reading above 50 indicates growth, while one below 50 shows contraction.

The electronics sector PMI also showed an increase of 0.2 point from November, in what was a faster rate of expansion at 51.

December was the 17th consecutive month of growth for the sector, with the latest increase attributed to faster expansion rates in the key indexes of new orders, new exports, factory output, inventory and employment.

But the electronics finished goods index posted a contraction for the first time, after seven months of continuous expansion.

Ms Sophia Poh, SIPMM vice-president for industry engagement and development, said: “The latest PMI readings bode well for the manufacturing sector despite the heightened concern about the Omicron Covid-19 variant, and the effect of disrupted supply chains.”

The latest PMI reading was attributed to slightly faster expansion rates in the key indexes of new orders, new exports, factory output, inventory and employment.

Meanwhile, the indexes of finished goods, input prices, supplier deliveries, and order backlog recorded slower expansion rates.

Furthermore, the supplier deliveries index continued to post continuous growth for the eighth straight month, despite supply disruption concerns.

UOB economist Barnabas Gan said the latest PMI reading is also in line with the general improvement in Singapore’s economic conditions and aligned with recovery across Asia.

He noted that the manufacturing PMIs for Malaysia, South Korea, Taiwan, the Philippines and Vietnam have accelerated, according to the latest readings.

“These suggest that manufacturing momentum in Asia remained largely buoyant especially as Covid-19 vaccination rates improved towards the end of 2021,” he said.

The outlook also remains bright for the industry.

Ms Poh said: “Going forward, local manufacturers are quietly optimistic that manufacturing growth will continue into the new year, and that the global pandemic is expected to become endemic.”

Mr Gan added that Singapore’s manufacturing sector remains one of the key support pillars for the economy.

“For 2022, we expect full-year manufacturing to grow by an average of 4 per cent, underpinned by the buoyant global trade activity expected for the year ahead.”

But he also cautioned that the Omicron variant remains a key downside risk to global trade and will likely impact Singapore’s manufacturing outlook.

Moreover, the sustained expansion of the input prices index in particular highlights the inflation risks into 2022, he said.

This is especially so if producers pass down the higher input prices to consumers.

Singapore’s consumer prices rose the fastest since Feb 2013, with headline inflation at 3.8 per cent in November, led by higher overall commodity prices, he observed.