While recent industrial output figures have been promising, one key manufacturing indicator has skidded.
The purchasing managers' index (PMI) - usually seen as an early barometer of manufacturing - not only dipped into the contractionary zone in March, but is also at its lowest level in almost five years.
After nine months of expansion and one month at the 50-point threshold, the index lost 0.9 of a point last month to 49.4, denoting contraction. The last time the PMI was this low was May 2003.
The electronics PMI also lost half a point in March but is still hovering in the black at 50.7.
According to the Singapore Institute of Purchasing & Materials Management (SIPMM) - which polls purchasing executives at more than 150 manufacturing firms every month to produce the indices - a decline in new orders, output, imports and employment led to the drop in the March PMI.
Electronics manufacturers apparently enjoyed brisk demand from domestic - but not overseas - customers.
The PMI is supposed to be a leading indicator of manufacturing. But the recent numbers - which show slowing momentum since December last year - appear to be out of sync with official industrial output figures, which rebounded strongly this year.
February's industrial output growth was particularly strong, raising the first two months' growth average to a robust 11.5 per cent - and prompting hopes of strong first-quarter GDP data.
But March's PMI come-down does not bode well, if indeed it is indicative of manufacturing performance. Perhaps the link between the PMI and the official industrial production index should soon become more apparent.
According to SIPMM executive director Janice Ong, manufacturers remain cautious about the business outlook and do not wish to over-commit themselves in stocking up raw materials or finished goods. Hence the big drop in March output after 10 months of expansion.
Even electronics manufacturers enjoying stronger demand and growth prospects are 'still managing their business activities with extreme care' and are loathe to over-stretch their resources.
Thursday, April 3, 2008
Purchasing index slips to lowest level in 5 years
Posted by
Nigel
at
10:34 PM
Labels: Singapore Economy
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