Manufacturing activity in Singapore continued to improve in January for the seventh consecutive month.

Data released by the Singapore Institute of Purchasing and Materials Management (SIPMM) shows a 0.2 point m-o-m expansion in the republic’s Purchasing Managers’ Index (PMI) to 50.7.

This marks the highest level the index has been at since March 2019 when it was 50.8 points.

January’s reading follows the 50.5 point expansion logged in the month before. 

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.

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SIPMM attributes the latest showing to faster expansion in new orders, new exports and factory output. Interestingly, the factory output index logged a reading of 51.5 in January, making this the highest it has been since November 2018.

The order backlog index similarly logged its seventh month of expansion, while the inventory index logged its ninth month of growth, albeit at a slower rate.

Even so, the employment index for the manufacturing industry remained contractionary, albeit rising by 0.5 points to 49.8 in January. This marks the eleventh consecutive month of contraction in the index.

"Manufacturers are cautiously optimistic of a positive outlook for the year, but are also concerned about the resurgence of Covid-19 infections, and especially the countermeasures that are taken by affected countries in the region," said SIPMM vice-president for industry engagement and development, Sophia Poh.

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Agreeing, Selena Ling – who heads the treasury research and strategy division of OCBC Bank notes that some moderation in manufacturing momentum has been expected in 1Q2021.

“This seems to be materialising globally and regionally, including for Singapore’s electronic PMI,” adds Ling.

Electronics PMI edged down by 0.2 points to 51.0 points, making this the metric’s fifth consecutive month of expansion. This follows a slower expansion in new orders, new exports, factory output and inventory, SIPMM notes.

Still, improvements were seen in employment levels in the electronics sector as well as supplier deliveries which returned into expansionary territory after being in the red for 11 months.

In this time, the electronic order backlog index remained expansionary in January for the seventh straight month, albeit slowing marginally from the month before.

OCBC’s Ling cautions that there may possibly be disruptions to the global supply chain of the semiconductor industry due to the lockdowns imposed in several countries. She adds that disruptions may also come from geopolitical uncertainties.

Even so, she believes that the electronics sector will be “in the driver’s set this year”, together with precision engineering. 

However, the biomedical cluster – a highly volatile sector which contributed substantially to Singapore’s factory output in 2020 – is expected to be handicapped by its very high base of 25.6% growth registered last year, adds Ling.