Is SG’s manufacturing sector on the road to recovery?

The Lion City’s PMI rose in July to 49.3.

Despite two consecutive months of improvement in Singapore’s Purchasing Managers' Index (PMI), experts believe that it's still early to call for a manufacturing recovery.

UOB Senior Economist Alvin Liew underscored that the headline PMI is still in the contraction territory.

“The sub-50 print still correlates with our view that Singapore continues to experience headwinds in the manufacturing sector,” Liew said.

Though there also has been a slower contraction in the electronics PMI in July, Liew remains hesitant to “call for a bottom  in the current electronics downcycle.”

Liew, however, said there have been encouraging signs of demand recovery in the electronics segment “based on the improving order backlog index for both headline and electronics sector.”

Overall, Liew reiterated that “it is too early to call for a manufacturing recovery or a bottom to the electronics sector’s current downcycle cycle yet.”

Liew added that electronic powerhouses in South Korea and Taiwan remained in contraction territory in July.

“Whilst Singapore has managed to avoid a technical recession in 1H 2023, we think some measures of weakness in manufacturing will linger,” Liew said.

“We may yet see a few more months of sub-50 PMI prints for headline and electronics sector PMI before more positive prints emerge in the later part of 2H 2023,” he added.

Given these factors, UOB retained its forecast of a 5.4% contraction for Singapore’s manufacturing sector.