Chart of the Day: Manufacturing sector's rebound could be a one-off

Even tech has to be cautious.

According to CIMB, on the surface, manufacturing got off to a good start with overall and tech PMIs gaining better-than-expected 1.6 pts and 3.3 pts in Jan, to 50.2 and 49.9 respectively.

That said, CIMB believes across-the-board sequential improvements for the key components, from new and backlog orders, employment and output to inventory, were due to a ramp-up of production ahead of the long Lunar New Year holiday.

"We don’t see the latest readings as evidence of a turnaround in Singapore’s manufacturing, particularly tech, just yet," CIMB said.

Here's more from CIMB:

Perhaps it has to do with the long Lunar New Year break in Feb, Singapore’s factories were busier than expected in Jan. Factory output, as measured by the monthly PMI, recovered 1.6 pts last month to 50.2, its strongest monthly gain since Feb 12 (+1.7 pts, after CNY month).

Although we highlighted the possibility of a near-term rebound, the Jan reading exceeded expectations (consensus: 47.1, CIMB: 48.4) and represented the first expansion for manufacturing after six months of contraction.

All components (except prices paid for inputs) rose, led by New Orders (+2.5 pts to 51.0) and Backlog Orders (+2.1 pts to 49.7) as well as Output (+2.6 pts to 49.7).

The last time we saw similar strong sequential rebounds in New Orders and Output was in Feb 12 (New Orders: +3.3 pts, Output: +1.6 pts), after companies resumed “normal business” following the festive break in late Jan 12.

Other notable gains last month were made by Employment (+1.9 pts to 50.9), Imports (+1.7 pts to 49.0) and Stocks of Finished Goods (+1.9 pts to 51.2). 

Readings for seven of the 10 PMI components were above 50, the most since May 12’s eight (only three above 50 in Dec 12 and two in Nov 12).