Christmas comes early for factories in Singapore

Christmas comes early for factories in Singapore

SINGAPORE'S factories are gearing up for stronger demand as the year-end festivities approach, according to data out yesterday.

October's Purchasing Managers' Index (PMI), an early indicator of manufacturing activity, reached its highest level in more than a year on the back of an increase in both domestic and export orders, as well as an uptick in production and inventory.

"This is a hopeful indication that stronger United States demand is finally trickling down to our manufacturing sector," said Barclays economist Leong Wai Ho.

Electronics makers, in particular, look to have cranked up production and increased employment on the back of higher demand.

While the overall PMI rose to 51.9 from September's 50.5 reading, the electronics PMI jumped to 52.5 last month from 51.9 in September. This was its highest level since April 2011. A reading above 50 indicates growth.

The monthly data is compiled by the Singapore Institute of Purchasing and Materials Management from a survey of more than 150 firms.

Sentiment in the manufacturing sector - which makes up about a fifth of Singapore's economy - has improved modestly from an uptick in the US in recent months although the tepid global outlook means a decisive rebound remains elusive.

While the latest PMI readings were "unexpected", OCBC economist Selena Ling warned against being too upbeat.

The overall PMI for electronics came in stronger, but new export orders, inventory, prices, deliveries and order backlog eased in October compared with the previous month, she noted.

"This, we suspect, could suggest that the current momentum is likely to slacken in the coming first quarter in 2015 once the Christmas season is past." Singapore's relatively stronger performance deviated from lacklustre PMIs across the rest of Asia, even as things ticked up in the US and Europe.

Germany helped pull up the euro zone, while the US economy "is probably on a steady expansion path, if at a less inspiring, underlying pace than many seem to believe", said Mr Frederic Neumann, the co-head of Asian economic research at HSBC.

Both South Korea and Taiwan - considered bellwethers for the regional, if not global, industrial cycle - recorded weaker readings last month compared with September.

In China, both the HSBC and the official PMIs indicated a slowdown in new orders, showing that the mainland's "industrial sector is not heading for a bounce", said Mr Neumann.

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