Growth in Singapore's manufacturing activity hits two year high in March 2021

Manufacturing sentiment in Singapore continued to improve for the ninth consecutive month in March.

Data released by the Singapore Institute of Purchasing and Materials Management (SIPMM) shows a 0.3 point increase in the republic’s Purchasing Managers’ Index (PMI) to 50.8.

This follows the 50.5 point expansion logged in the month before and marks the highest level the metric has been at since March 2019 when the reading was also 50.8.

The PMI index is a key barometer indicating a nation’s manufacturing activity. A reading above 50 indicates an expansion in output, while that below 50 points to an industry shrinkage.

SIPMM attributes the latest showing to higher expansion rates in the indices of new orders, new exports, inventory and employment.

Meanwhile, the electronics PMI – a separate metric – posted a 0.2 dip to 50.6 points in March.

This follows slower expansion rates for the indices of new orders, new exports, factory output, inventory and employment, notes SIPMM.

Still, higher expansion rates were recorded for the indices of finished goods stock, imports, input prices and order backlog from the electronics sector.

Selena Ling who heads the treasury research and strategy division of OCBC reckons that consumer electronics could be affected by the ongoing global chip shortage, which may have already started to hurt global supply chains.

This shortage in supply – particularly from Asia to Europe – may also have been exacerbated by the Suez Canal blockage, she adds. This may stem more from an issue of supply rather than falling demand, noted Ling.

Agreeing, Sophia Poh, SIPMM’s vice-president of industry engagement and development reckons that the supply chain disruptions from the blockage may have an impact that lasts for several months.

Even so, economists at RHB Bank expect electronics PMI to remain expansionary as the sector continues to benefit from the high demand for semiconductors, at least for the next one to two quarters.

The economists also expect overall PMI to remain above the 50-threshold for the first half of the year. This follows the resumption of more economic activities in the next one to two quarters, they elaborate.