Red Sea diversions strain Singapore's PMI

PMI dipped to 50.4 in June.

Singapore has felt the burn of Red Sea diversions, with its Purchasing Managers' Index (PMI) dipping in June. Increased nautical miles and longer sailing times from diversions caused the supplier deliveries subindex to decrease to 50.1 from 50.3. 

Declines in supplier deliveries, finished goods, and order backlog subindexes contributed to the slower PMI expansion in June, according to the Singapore Institute of Purchasing and Materials Management (SIPMM). 

In addition to the Red Sea diversion, UOB Associate Economist Jester Koh stated that increased US import tariffs targeting Chinese exports in sectors such as semiconductors, EVs, batteries, and solar cells have further strained Singapore's port congestion, as exporters expedite shipments ahead of the 1 Aug 2024 implementation timeline. 

Germany-based Container xChange predicts prolonged port congestion in Singapore.

The platform attributed the prolongation to vessel bunching, off-schedule arrivals, and a rise in throughput. 

Despite the likely continuation of port congestion in Singapore, Koh is optimistic about the recovery of the electronics and semiconductor sectors, thanks to supportive base effects in 2Q-3Q24 and strong end-demand fundamentals bolstered by generative AI-related applications, positively affecting the consumer segment. 

"Furthermore, the anticipated easing of financial conditions as central banks in major advanced economies commence lowering policy rates could provide some tailwinds to global investment and consumption activity towards the latter half of the year," Koh added.