Singapore’s Manufacturing Sector Expands with Electronics Leading Growth

Singapore’s manufacturing sector showed significant improvement in August, with factory output reaching its highest level in over three years and electronics production achieving its strongest performance in six years. The latest data from the Singapore Institute of Purchasing and Materials Management, released on September 2, reveals that the Purchasing Managers’ Index (PMI) increased to 50.9 points in August from 50.7 points the previous month. This marks the 12th consecutive month of expansion in the manufacturing sector.

The electronics PMI also rose, reaching 51.3 points, up from 51 points in July. Readings above 50 indicate growth, while those below 50 suggest contraction. This represents the electronics sector’s 10th month of growth, highlighting its robust performance amid broader manufacturing improvements.

Noteworthy is the turnaround in the manufacturing sector’s sub-indexes for employment and supplier deliveries, which had previously been in contraction. These indexes turned positive in August, signaling improved conditions. However, the supplier deliveries index for electronics continued to lag, remaining in contraction for the fourth month despite a slight improvement.

Regionally, South Korea and Taiwan continued their upward trajectory, while China’s data revealed a mixed picture. Smaller, export-oriented manufacturers in China showed signs of recovery, but the broader sector faced stagnation. Japan experienced contraction, though demand for semiconductors and a rebound in car production helped mitigate the impact. Malaysia and Indonesia also remained in contraction.

Maybank Research’s Dr. Chua Hak Bin praised the positive data, particularly in light of weaker manufacturing PMI numbers from China. DBS Bank economist Chua Han Teng described the improvements as encouraging for Singapore’s gradual factory recovery in the latter half of the year. He noted that the electronics sector’s sustained expansion could indicate strong performance in the coming months.

Dr. Chua highlighted that the electronics recovery is broadening beyond artificial intelligence (AI) chips, with new AI-integrated products supporting tech demand. Manufacturers are also benefiting from diversified supply chains beyond China, amid ongoing US tech sanctions. UOB’s Jester Koh pointed to strengthening near-term demand, supported by rising backlogs of orders and recent positive data.

Looking ahead, potential risks include slowing US growth and uncertainty surrounding the US presidential election in November. Dr. Chua anticipates that a Trump victory could lead to significant tariff hikes, while a Harris win may result in more targeted measures. Despite these uncertainties, he remains optimistic about Singapore’s economic prospects, forecasting GDP growth of 3% in 2024 and 2.4% in 2025. Koh added that policy rate cuts by major central banks could further stimulate investment and consumption, providing additional support to the economy.