Singapore's private sector logs fastest growth in new orders in a year

BUSINESS conditions in Singapore improved further in March, as stronger domestic demand boosted growth in new orders to their fastest pace in a year.

New export orders, however, fell slightly for the first time in five months, indicating only a slight improvement in overall operating conditions.

The latest Nikkei Singapore Purchasing Managers' Index (PMI) released on Tuesday shows that the index was at 52 last month, up from 51.6 in February.

The Nikkei Singapore PMI is an economy-wide indicator of activity, with each sector weighted for its contribution to gross domestic product; sectors reflected include manufacturing, services, construction, transportation and storage, and retail. The index is based on a survey of executives from more than 400 private-sector companies.

Readings above 50 signal an improvement in business conditions from the previous month, and readings below 50, a deterioration.

The rate of output growth in March was the strongest so far this year. Financial information provider Markit said: "Anecdotal evidence suggested that new-client wins and promotional activities had been key factors leading to increased amounts of new work."

Despite the uptick, the rate of overall improvement remained modest, it said.

Employment in the private sector fell for the first time since last November, though only slightly. Some respondents indicated that their companies are not replacing staff who have resigned, said Markit.

The increase in new business, coupled with lower staff numbers, led to the sharpest rise in backlogs since the index was started in August 2012.

There was also a dip in purchasing activity, as companies with sufficient stocks stopped buying.

Noting that the growth in total new work was let down by a drop in new export orders, Markit economist Annabel Fiddes said that firms appeared to be relatively cautious in their business outlook, with employment and purchasing activity falling slightly in March.

"With overall growth of the sector remaining relatively lacklustre, it will be interesting to see whether the recently announced Budget will boost demand and growth momentum in the second quarter," she said.

The strengthening in the Nikkei PMI figure comes on the back of data that showed that factory activity had declined at a slower pace last month.

Singapore's manufacturing PMI was at 49.4 last month, up from February's 48.5, which was the lowest reading in three years, going by data released by the Singapore Institute of Purchasing & Materials Management on Monday.

The improvement was in line with a rebound in manufacturing PMI in March across US, Europe and Asia excluding Japan, economists noted. But they cautioned that full recovery is still some way off, since new orders for factory output are still shrinking.

This article was first published on April 6, 2016.
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