Singapore's manufacturing PMI edged up to 51.1 in May

But rising costs hamper future growth.

According to DBS, Singapore's May PMI did not disappoint. The leading indicators have surprised on the upside. Key manufacturing PMI posted a higher 51.1, an increase of 0.8 point overthe previous month while the electronics PMI continued to reflect an expansion in the industry, coming in at 51.4, up 0.2 from April.

Here's more:

Importantly, the overall manufacturing PMI and allthe sub-indices are all pointing to a broad-based improvement in production output in the next 1-2 months. This is in line with the improved sentiment and expectation of a stronger recovery in the global economy.

Note thatthe new orders, new export orders, import and employmentindices are unanimously suggesting stronger demand ahead.

The turnaround in the electronics industry remainsfirmly on track. New orders have been robust while backlog has continued to rise, hinting of continued improvement in demand.

Furthermore, restocking is still in progress within the industry, judging from the decline in stocks offinished goods as well as the persistent increase in electronics imports and inventory.

Nonetheless, the key risk to note for the manufacturing sector in the coming quarters is that the decline in overall competitiveness due to the rapid increases in business and labour costs will continue to hamper the performance of this sector.

This is the structural drag despite an impending cyclical improvement on the external front.