PMI remains in contraction at 45.6 in July: IHS Markit

In line with SIPMM’s results, it was the highest figure recorded in five months.

Singapore’s purchasing managers’ index (PMI) stayed in the red but edged higher from 43.2 in June to 45.6 in July, according to the latest results from IHS Markit. On the upside, this is the report highest figure is to be recorded since February.

Also read: PMI expands to 50.2 in July after months of contraction: SIPMM

Although the latest figure remained below 50 and indicated a further marked deterioration in the health of the private sector, IHS Markit noted that it represented a much improved picture on the situation in April and May.

"Latest PMI data indicated that the economic downturn across Singapore's private sector continued to ease in July. However, other survey indicators cast doubts on the sustainability of the recovery in the coming months,” warned Bernard Aw, principal economist at IHS Markit.

Business activity rose for the first time since January, with growth largely driven by construction and wholesale and retail activities as businesses returned to work. Survey data showed output of both the manufacturing and service sectors declined further, albeit at slower rates.

However, demand conditions continued to soften in Q3. Total new orders contracted for a sixth straight month, though the rate of decline was the weakest since January.

On the other hand, IHS Markit noted that there were encouraging signs of an improvement in the overseas market. Export orders rose slightly in July, for the first time in 2020, with respondents highlighting greater demand from American clients. The report also indicated a slight rise in capacity pressures, as shown by a rise in backlogs of work.

However, anecdotal evidence suggested that additional workloads were linked to social distancing measures.

Business confidence deteriorated sharply, with a much greater proportion of firms anticipating a decline in activity levels in the year ahead. A number of firms mentioned business closures and expectations of a prolonged impact of the pandemic on the economy.

Amidst greater economic uncertainty and efforts to limit costs, firms continued to reduce staffing numbers. Employment dropped for an eleventh straight month, falling at one of the fastest rates in the survey history surpassed only by the unprecedented declines in March, April and May. Firms also cut back on input purchases and inventories severely.

In addition, pressure on supply chains persisted in July. Companies highlighted material shortages, a lack of manpower, and closures of overseas suppliers as reasons for delivery delays.