January PMI up 0.2 points to 50.2

New orders, new exports, output, inventory and finished goods continued to improve.

Singapore’s PMI grewfor the second consecutive month and inched up 0.2 points to 50.3 in January, according to data from SIPMM. Likewise, the electronics PMI have reversed its 14 months of contraction as it also rose 0.2 points to 50.1.

The manufacturing PMI improved thanks to increased new orders, new exports, output, inventory, finished goods, imports and order backlog gauges. The expansion of the electronics PMI was attributed to first-time improvements in new orders, new exports, factory output and order backlog gauges.

However, the increases were offset by slips in the electronics inventory, finished goods and deliveries gauges compared to December readings.

According to a note by OCBC Investment Research (OIR), the January manufacturing and electronics PMI readings reaffirmed the former tone in the Department of Statistics’ (SingStat) latest Business Expectations survey, which showed that a net weighted 12% of manufacturers and 23% of electronics firms are anticipating a stronger H1 2020 business outlook.

“This is a sharp turnaround from the survey three months ago which showed that a net weighted 5% of manufacturers and 7% of electronics firms were expecting a deteriorating outlook for 4Q19-1Q20,” said Selena Ling, OCBC Bank’s head of treasury research & strategy.

Ling noted that the most upbeat industry in this survey was electronics, led mainly by semiconductors (net weighted +36% from -7% previously), whilst the computer peripherals & data storage industry (+6% versus +15% previously), infocomms & consumer electronics (+13% versus +3% previously) and the other electronic modules & components remained very bearish (-57% versus -65% previously).

Outside the electronics segment, the transport engineering cluster turned more upbeat at +15% (from +5%), followed by precision engineering (+8% from -12% previously), and biomedical (+7% from +10% previously). Meanwhile, general manufacturing industries still lagged at -4% (albeit an improvement from -11% previously).

“Going forward, the key to watch will be the supplier deliveries index which both slipped 0.1 point in January to 50.7 for the manufacturing sector and to 50.4 for the electronics sector,” Ling added.

OIR noted that whilst this could be partly due to the factory closures for the Chinese New Year festive holidays, the widening Coronavirus outbreak, coupled with the travel restrictions and quarantine orders for affected Chinese workers, may only start to show up more significantly in subsequent data. One example cited was the reported 30,000 work pass holders of Chinese nationality who had left Singapore over the CNY that have not returned, which will then likely lead to some staffing issues, albeit it is unclear if the services firms may be more affected.

Another roadblock to expect is any disturbance to the regional supply chains due to the outbreak that may have a domino effect on the domestic manufacturing and electronics PMIs.