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Straits Times
3 days ago
- Business
- Straits Times
Singapore factory activity stays in contraction for second month on global trade uncertainty
The purchasing managers' index edged up 0.1 point from April to post a slower contraction reading at 49.7 points. PHOTO: ST FILE Singapore factory activity stays in contraction for second month on global trade uncertainty SINGAPORE – Manufacturing activity in Singapore shrank again in May, although at a slower pace than the month before, as US President Donald Trump's tariffs continued to threaten the global economic outlook, despite a de-escalation in the US-China trade war. The purchasing managers' index (PMI), a barometer of the manufacturing sector's health, edged up 0.1 point from April to post a slower contraction reading at 49.7 points. Readings above 50 indicate growth, while those below point to contraction. This is the second contraction reading for the overall manufacturing sector, after having recorded 19 months of expansion, said the Singapore Institute of Purchasing and Materials Management (SIPMM), which issued the report on June 2. Before falling into contraction in April, the last time the manufacturing PMI reading was below 50 was in August 2023 when it stood at 49.9 points, SIPMM data showed. Mr Stephen Poh, SIPMM's executive director, said the slower contraction reading in May could be a result of thawing US-China trade tensions, with the world's two largest economies slashing their tariffs substantially. 'However, global uncertainty remains despite the temporary suspension of tariffs,' he said. Under an agreement reached on May 12, the US slashed tariffs on China from 145 per cent to 30 per cent, while Beijing's retaliatory levies on US goods were lowered to 10 per cent from 125 per cent. The tariff reprieve is meant to last 90 days, during which time negotiators hope to secure a longer-term agreement. However, on May 30, President Trump accused China of violating terms of the truce on tariffs, a claim China has responded to with its own accusations of US wrongdoing. Said Mr Poh: 'Amid the geopolitical fragmentation, supply chain disruptions are becoming more frequent and less predictable.' Still, the latest PMI reading reflects slower contractions in key sub-indexes such as new orders, factory output and employment and faster expansions of input purchases and imports. Input prices, finished goods and order backlog also contracted at a slower pace, while the future business index shrank at a faster pace compared with April. The PMI for the electronics sector – which accounts for about 40 per cent of Singapore's manufacturing output – edged up 0.1 point in May from the previous month to post a slower contraction at 49.9 points. Before the 1.1-point drop in April, the sector had expanded for 17 straight months. This latest reading for the sector was helped by faster expansion in new orders, input purchases and imports. Also, the new exports index reverted to an expansion and factory output shrank at a slower pace. However, employment in electronics contracted in May at a faster pace, and indexes of finished goods, supplier deliveries, factory output and order backlog recorded slower expansion readings. DBS Bank senior economist Chua Han Teng said US tariff uncertainties and global trade frictions, despite the temporary suspension of US reciprocal tariffs, are negative for Singapore's external demand prospects, and will likely weigh on new export orders and factory production, particularly in the second half of 2025. 'Singapore's export-oriented factories remain vulnerable to the US tariff roller coaster,' he said. The Republic's latest PMI reading comes on the back of shrinking factory activity in May across much of Asia. Soft domestic demand in China and the impact of US tariffs took a heavy toll on manufacturing companies, private surveys showed on June 2. Trade-reliant Japan and South Korea continued to see manufacturing activity contract in May as President Trump's car tariffs clouded the outlook for exports. Adding to the gloom, an official survey on May 31 showed China's manufacturing activity shrank in May for a second month in a sign of weakness in the world's second-largest economy. Ms Xiaoqing Pi , Greater China economist at Merrill Lynch, said: 'While the US-China trade truce boosted sentiment, the recovery in growth momentum is far from solid, with domestic demand remaining weak.' Vietnam, Indonesia and Taiwan also saw factory activity shrink in May, private surveys showed. Join ST's Telegram channel and get the latest breaking news delivered to you.
Business Times
3 days ago
- Business
- Business Times
Singapore PMI marks slower contraction in May as trade tensions thaw but uncertainty remains
[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. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up 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.
Business Times
02-05-2025
- Business
- Business Times
Singapore factory activity in April records steepest fall since Covid, mirroring regional pullback
[SINGAPORE] Singapore's overall factory activity fell sharply last month, retreating into contraction territory and mirroring the regional pullback, as US President Donald Trump's 'Liberation Day' tariffs began to exact a toll on manufacturers. The city-state's Purchasing Managers' Index (PMI) dropped to 49.6, shaving off one point from the previous month and ending a 19-month streak of expansion, data from the Singapore Institute of Purchasing and Materials Management (SIPMM) showed on Friday (May 2). A reading above 50 indicates expansion. The electronics sector PMI, which was on a 17-month streak of expansion, also recorded a steep fall to 49.8 in the same period, down 1.1 points from March. These readings coincide with Trump's onslaught of tariffs announced on Apr 2, even if they are on pause for most countries other than China. DBS economist Chua Han Teng said that the fall in the readings was the steepest observed since the Covid-19 pandemic in early 2020. 'A more protectionist global landscape – led by higher US tariffs on a wide range of trading partners including China – will likely further dampen external demand, negatively impacting Singapore's manufacturing prospects, especially in the second half of 2025,' he noted. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up He added that Singapore's electronics and biomedical manufacturing clusters remain 'susceptible' to potential US levies on semiconductor and pharmaceutical imports that could be introduced later on. 'Singapore's deep integration into the global semiconductor supply chain makes it indirectly vulnerable to a broader US tariff-induced semiconductor downturn. US pharmaceutical import duties pose higher downside growth risks for Singapore compared to other Asean-6 peers,' he explained. Regional retreat Elsewhere, China's official PMI fell to 49 in April, from 50.5 in March, representing the fastest fall in 16 months. The Caixin PMI, derived from smaller private manufacturers, came in at 50.4, down 0.8 point from before. While this is the lowest recording since January, April marks the seventh straight month of expansion. 'The US tariff hikes took a toll on external demand, with new export orders declining at the fastest rate since July 2023, leading to just a marginal increase in total new orders in April,' said Wang Zhe, senior economist at Caixin Insight Group. Despite the early negative impact from the tariffs, however, Citi economists Yu Xiangrong, Hu Yuanliu and Ji Xinyu said in a report that 'the path for de-escalation could be relatively narrow and domestic support would likely step up ahead'. They added that the 'hard trade data' may hold up better, based on their tracking of port and shipping. In South Korea, the S&P Global Manufacturing PMI sank deeper in April at 47.5, from 49.1 the previous month. This is the most pronounced worsening of business conditions since September 2022. 'According to manufacturers, challenging domestic economic conditions and the impact of US tariffs weighed heavily on the sector, stymieing new product launches and sales in both domestic and external markets,' said Usamah Bhatti, economist at S&P Global Market Intelligence. Similarly, Taiwan's PMI, also published by S&P Global, dived to 47.8 in April, down two points from the month before and the quickest rate of decline since December 2023. Annabel Fiddes, economics associate director at S&P Global Market Intelligence, said that manufacturers reacted to the weaker demand environment 'by curbing their input buying, downwardly adjusting their stock levels and cutting their selling prices'. Countries across South-east Asia also saw their PMI receding into contraction. In particular, the S&P Global Indonesia Manufacturing PMI plunged to 46.7 in April, from 52.4 in the previous month – the most marked deterioration in business conditions since August 2021. 'In response, firms engaged in retrenchment practices by scaling back purchasing and employment levels while also winding down stocks of inputs and finished items,' said Bhatti. He added: 'The near-term outlook remains clouded, as manufacturers redirected capacity to complete outstanding business in the absence of sales, suggesting that the current malaise will extend into the coming months.' Malaysia and Thailand recorded more marginal decreases – down 0.2 point to 48.6 for the former; and 0.4 point lower to 49.5 for the latter.
Straits Times
02-05-2025
- Business
- Straits Times
Singapore factory activity shrinks after 19 months of growth as Trump tariffs hit export orders
Electronics saw a first-time contraction in new exports, factory output, and employment. PHOTO: ST FILE Singapore factory activity shrinks after 19 months of growth as Trump tariffs hit export orders SINGAPORE - Manufacturing activity in Singapore fell into recession territory in April as tariffs announced by US President Donald Trump triggered a wave of export-order deferments and cancellations. The purchasing managers' index (PMI), a barometer of the manufacturing sector's health, fell to 49.6 points in April, down one point from 50.6 in March. Readings above 50 indicate growth while those below point to contraction. The contraction in Singapore's factory activity snaps 19 straight months of expansion, said the Singapore Institute of Purchasing and Materials Management (SIPMM), which issued the report on May 2. The last time the manufacturing PMI was below 50 was in August 2023 when it stood at 49.9 points, SIPMM data showed. Mr Stephen Poh, SIPMM's executive director, said the US tariffs have started to take a toll on the local manufacturing sector. 'Local manufacturers reported order deferments and cancellations from foreign buyers who were greatly affected by the high reciprocal tariffs,' he said. The PMI for the electronics sector – which accounts for about 40 per cent of Singapore's manufacturing output – dropped by 1.1 points to 49.8 points for the first contraction after 17 months of expansion. Mr Chua Han Teng, senior economist at DBS Bank, said the PMI decline was the steepest observed since the onset of the Covid-19 pandemic in early 2020. It looked consistent with the deteriorating business sentiment among manufacturing firms for April to September 2025 , as shown by the Economic Development Board quarterly survey on April 30, he added. Trade tensions and uncertainty over the global economic outlook have risen since April 2 when President Trump announced a raft of tariffs. A 90-day pause was declared on the higher-band levies, dubbed reciprocal tariffs. However, all countries including Singapore are subject to a baseline tariff of 10 per cent. China, Singapore's top trading partner, is the only country that is still subject to US tariffs announced on April 2 and which were subsequently raised to an unprecedented level of 145 per cent. The 25 per cent sectoral levies on all US imports of steel, aluminium, and automobiles and parts remain in place as well. Also, Mr Trump has threatened to impose similar levies on imports of pharmaceuticals and semiconductors. SIPMM said the latest manufacturing PMI reading was attributed to a first-time contraction in the key indexes of new orders, factory output and employment. Slower expansion rates were recorded for new exports and imports, and input purchases. The future business index reverted to a contraction after posting 21 months of continuous expansion. Meanwhile, supplier deliveries, finished goods and order backlogs posted faster expansions. For electronics PMI, the latest reading was attributed mainly to a first-time contraction in new exports, factory output and employment. Slower expansions were recorded for new orders, input purchases, finished goods and imports. Meanwhile, faster expansions were recorded for supplier deliveries and order backlogs. Both the input prices and future business indexes reverted to contraction. Mr Chua said: 'Softer new export orders reflect weakened external demand for Singapore's manufactured goods, including electronics, which also spilled over negatively to production and employment.' The weakness in PMI data also comes on the heels of a Monetary Authority of Singapore (MAS) report on April 28 which showed industrial production moderating to an annual 4 per cent growth in the first quarter of 2025 from 5.5 per cent in the fourth quarter of 2024. MAS said the output was mainly weighed down by slower activity in the electronics cluster. On April 14, the Ministry of Trade and Industry (MTI) said Singapore's seasonally adjusted gross domestic product contracted by 0.8 per cent quarter on quarter in the first three months of 2025, a pullback from the 0.5 per cent expansion in the last quarter of 2024. MTI downgraded the Republic's growth forecast to 0 per cent to 2 per cent from 1 per cent to 3 per cent previously. Singapore's economy grew 4.4 per cent in 2024. Mr Chua said Singapore remains vulnerable to the heightened unpredictability and uncertainty from the 'US tariff roller coaster'. 'A more protectionist global landscape led by higher US tariffs will further dampen external demand, negatively impacting Singapore's manufacturing prospects, especially in the second half of 2025,' he added. Manufacturing and exports around the world are showing early damage from US tariffs and trade uncertainty. In China, factory activity in April slipped into the worst contraction since December 2023. Manufacturing activity in the US, Singapore's second-biggest trade partner, shrank for the second straight month in April, dropping to a five-month low. For the rest of Asia, April factory activity contracted in South Korea, Taiwan, Thailand, Malaysia and Indonesia. The Philippines was the standout, as the upcoming local elections drove its PMI into expansion territory. Join ST's Telegram channel and get the latest breaking news delivered to you.
