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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.
