Singaporean manufacturing PMI falls in July, economy likely to grow about 2 pct in H2 2018

Singaporean manufacturing PMI dropped in July by 0.2 point to 52.3, while the electronics PMI fell 0.3 point to 51.6. This is consistent with most of the recent manufacturing PMI prints throughout Asia which indicated similar weakening, with the exception of Malaysia and Indonesia. The domestic manufacturing PMI had earlier peaked in January 2018 at 53.1, whilst the electronics PMI rose in September 2017 at 53.6, even though both readings remain in expansion territory in July.

The lower print for the manufacturing PMI was due to slower growth in new orders, new exports, factory output and inventory levels. A similar story was seen in the electronics PMI sub-gauges. Furthermore, sustained contraction for both the manufacturing and electronics sectors’ order backlogs gauges, along with rising stocks of finished goods, imply that the PMI readings would continue to fall in the months ahead, noted Selena Ling, Head of Treasury Research & Strategy, OCBC Bank.

Manufacturing growth is expected to decelerate considerably to about 1.9 percent year-on-year in the second half of this year, partially because of the high base in July-October 2017 and also the external uncertainties about the U.S.-Sino trade war. This is also consistent with the recent business expectations survey that indicated that just net 7 percent of manufacturers in Singapore expect a more favourable business prospects in the second half of 2018, compared to 13 percent seen one quarter ago.

“Given the stellar 1H18 GDP growth of 4.1 percent yoy (based on 2Q flash estimates) and with services expected to take the drivers’ seat in 2H18, our 2H18 GDP growth forecast of around 2 percent yoy still appears reasonable. As such, we will maintain our full-year 2018 GDP growth of 3 percent yoy”, added Selena Ling.