Singapore PMI marks slower contraction in May as trade tensions thaw but uncertainty remains

Business Times

02-06-2025

[SINGAPORE] Singapore's overall factory activity improved in May, but remained in contraction. This was as global powers' trade tensions de-escalated, but the outlook remains uncertain.
The city-state's Purchasing Managers' Index (PMI) posted a reading of 49.7 last month, up 0.1 point from April, data from the Singapore Institute of Purchasing and Materials Management (SIPMM) showed on Monday (Jun 2).
This marked two months of contraction, after a 19-month expansion streak. A reading above 50 indicates expansion.
Stephen Poh, executive director at SIPMM, noted that the slower contraction could be due to 'thawing trade tensions when the world's two largest economies slashed their substantial tariffs'. On May 12, the US and China agreed to temporarily roll back the bulk of sky-high tariffs imposed on each other since 'Liberation Day'.
Similar to Singapore's milder contraction, official Chinese data recorded an improvement, while University of Michigan data showed that US consumer sentiment rebounded in May, highlighted UOB associate economist Jester Koh.
The improvements likely reflect some degree of optimism from the temporary US-China truce, he said.
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Singapore's electronics sector PMI, which was on a 17-month streak of expansion till March, also recorded a second month of contraction. It edged up 0.1 point, to 49.9 in May.
The uptick, coming after five consecutive months of deterioration, is likely due to lingering front-loading momentum, said Koh, given the potential of higher tariffs after the US' 90-day pause on reciprocal tariffs and looming sectoral tariffs.
Still, Poh warned that global uncertainty remains despite the temporary tariff suspension, with more frequent and less predictable supply chain disruptions amid geopolitical fragmentation.
US President Donald Trump last week accused China of violating their agreement, while a spokesperson for China's ministry of commerce accused Washington of severely undermining the truce earlier on Monday.
These mutual accusations 'reflect the significant challenges in the path to achieving a lasting de-escalation of trade tensions', said DBS senior economist Chua Han Teng.
Ongoing uncertainty continues to threaten global trade and growth prospects, in turn contributing to weak business sentiment, including in Singapore's manufacturing PMI data, he said.
Chua flagged that the latest local data signals a 'weaker outlook', with minimal improvement following April's sharp declines.
Some sub-indices reflected the weakness, he said. Headline and electronics manufacturing production sub-indices contracted for the second straight month, Meanwhile, though they did not contract in May, headline and electronics new export orders sub-indices moderated from late-2024 peaks.
Koh noted that, 'more worryingly' than the overall PMI, the employment and future business sub-indices remain in contraction, possibly indicating concerns over demand prospects in the medium term, as trade negotiations are likely to take some time, with risks of re-escalation should talks go south.
Region mostly in contraction
Factory activity across Asia was largely similar to Singapore.
Figures from China's national statistics bureau showed that manufacturing PMI – 49.5 in May – shrank for a second straight month, but contracted at a softer pace. The Caixin PMI, derived from smaller private manufacturers, is yet to be released.
South Korea's S&P Global Manufacturing PMI picked up slightly from April, but remained in contraction at 47.7 in May. Its new orders saw the strongest fall since June 2020. Similarly, Taiwan's PMI, published by S&P Global, rose but stayed below the neutral level, at 48.6.
Slightly closer to home, Vietnam and Indonesia's PMI rose – indicating a slower contraction rate – but remained below the neutral 50 mark for the second successive month. Vietnam's PMI was 49.8, while Indonesia's was 47.4.
As for the Philippines, the latest PMI data indicated a setback to growth momentum built in April, with May recording broad stagnation in its manufacturing sector.