Private sector growth picks up in March

Firms signalled optimism for the first time since December 2016.

The current Purchasing Managers' Index (PMI) saw growth momentum in Singapore’s private sector pick up in March, with business conditions improving by a faster pace at the end of the first quarter.

According to IHS Markit, the headline Nikkei Singapore PMI rose to 52.2 from 51.4 in February, indicating a stronger improvement in the health of Singapore’s private sector.

IHS Markit stated that improved client demand underpinned upbeat business expectations for the first time since December 2016. Meanwhile, input costs surged by the greatest extent in over three-and-a-half years.

It said the improvement in the headline PMI was supported by growth in output and new business. Order book volumes increased at a quicker rate in March, with promotional activity and new product launches reportedly helping to boost sales, according to panellists.

Meanwhile, firms raised staff numbers for the fifth successive month in March in response to greater capacity pressures and a brighter outlook.

More so, despite greater manpower, the level of outstanding work saw the largest monthly rise in three months. Modest strains on supply chains were also seen, with longer delivery times reported for the second month running, although the rate of deterioration in vendor performance was only slight.

IHS Markit economist Bernard Aw said the pick-up recorded in March helped to boost business confidence, with firms signalling optimism for the first time since December 2016.

“However, delving a little deeper into the data revealed some worrying trends. March saw a sharp increase in cost pressures, the steepest in over three-and-a-half years, as wage inflation gained momentum,” he said.

He added, “At the same time, prices charged for Singaporean goods and services rose only modestly, indicating an ongoing squeeze on margins. Unless demand increases further, this could have repercussions on investment and hiring plans in the months ahead.”