Manufacturers swamped with unsold stock as PMI crashes to 3-year low

September PMI slumped to 48.6.

Unsold inventory is mounting in warehouses across Singapore as the manufacturing sector continues to contract. The latest Purchasing Managers’ Index (PMI) slumped to 48.6 in September, the lowest reading since December 2012.

A PMI reading above 50 shows an expansion in the manufacturing sector, while a reading below 50 indicates a contraction. This is month's PMI represents  the third cosnecutive month of contraction in the manufacturing sector.

According to DBS, the continued softness in PMI readings points to more downside risks for the manufacturing sector.

“All sub-indexes are down, except the stocks of finished goods index, which reflects a build-up in unsold stocks and weakness in demand. This latest set of PMI readings is consistent with the outcome in the region where PMIs of our key markets have all dipped lower,” DBS said.

“This has re-affirmed our view that the manufacturing sector is already in recession. It has contracted by 3 consecutive quarters in year-on-year terms and in 3 out of the past 5 quarters on a sequential basis. In fact, risk is the manufacturing sector performance may worsen in the coming months given the dicey external environment,” DBS noted.