Singapore’s manufacturing PMI rises up slightly by 0.3 pts to 48.9

But don’t pop the champagne just yet.

The city-state’s manufacturing PMI may have inched up by 0.3 points from last quarter’s reading, but it isn’t reason to celebrate, as it is now the fourth consecutive month with a reading below 50.

According to a report by DBS, though overall manufacturing and electronics PMIs registered some improvements, both indexes are still in contraction mode, with overall manufacturing registering 48.9, while electronics PMI inched higher by 0.1 to 48.6.

An index is considered in contraction mode when it registers a value below 50.

Sub-indexes for new orders and production were also higher, while inventory levels have eased, signifying some signs of life in manufacturers’ sentiments, said DBS.

“That said, stocks of finished goods have continued to rise, reflecting a steady build-up in unsold stocks amid weak demand. And sub-indexes for imports and employment are also trending lower, suggesting certain degree of cautiousness on the part of the manufacturers and the reluctance to ramp up production,” DBS says.

Meanwhile, unlike earlier predictions, outlook for the global economy has deteriorated.

“The US economy is still struggling with its tepid recovery and China is decelerating. There is simply a lack of growth impetus in the global economy that could potentially lift the manufacturing out of its doldrums in a sustained way,” DBS said.

DBS says structural challenges has also aggravated cyclical drags, weighing down manufacturing.

“External competition, continued increase in business costs and manpower shortage are eroding the medium term prospects of the sector. The GDP share of manufacturing has fallen from 26% in 2004-06 to just 17% in 2013- 2014. At the current pace of decline, the sector would become irrelevant before long,” DBS says.