SINGAPORE – A weaker global economy constrained local manufacturers a little in April but the sector still racked up its eighth consecutive month of expansion.

The purchasing managers’ index (PMI), a barometer of the manufacturing industry, dipped from 50.7 points in March to 50.5 points in April. A reading below 50 indicates contraction and one above denotes growth.

April’s slower rate of expansion was due to subdued growth in key areas such as new orders, new exports, factory output and input purchases, the Singapore Institute of Purchasing and Materials Management (SIPMM), which compiles the data, noted on May 2.

Meanwhile, the employment index recorded a slightly faster rate of expansion, and the supplier deliveries index returned to expansion after 10 consecutive months in contraction territory.

The PMI for electronics, a key manufacturing segment, crept up 0.1 point to 50.9 in April, from 50.8 in March.

SIPMM executive director Stephen Poh noted that the manufacturing sector continued its expansion on the back of higher demand for consumer electronics and products in the booming field of artificial intelligence (AI).

“However, global uncertainties dampened growth, arising from the ongoing geopolitical conflicts and the effects of inflationary pressures,” he added.

DBS Bank economist Chua Han Teng said the continued expansion of headline and electronics PMI readings signals a recovery in Singapore’s factory activity in the coming months.

He added that the expansion in supplier deliveries is an indication of better global supply chain conditions.

Mr Chua also noted that electronics factory production in April was the highest since December 2021 and that the sector’s performance will be key to the recovery in factory activity.

“Electronics factory production quickened for the second consecutive month, and hopefully, this can be sustained to fulfil improving demand,” Mr Chua added.

Singapore’s factory output fell 9.2 per cent year on year in March, a worse outcome than analysts expected and one that reversed the gains recorded in January and February.

Electronics output fell 11.3 per cent year on year despite an 18.8 per cent growth in infocomms and consumer electronics.

The decline was largely due to the semiconductor industry, where production shrank 14.4 per cent, noted Economic Development Board data on April 26.

Maybank economist Chua Hak Bin said the increase in April’s electronics PMI should ease concerns about a first-quarter slump in electronics exports and manufacturing extending into the next quarter.

“The current artificial intelligence chip boom will likely broaden to the more mature nodes, such as less advanced chips, which Singapore’s semiconductor ecosystem is stronger in,” he added.

OCBC Bank chief economist Selena Ling said the improvement in the electronics PMI should ease concerns about the slight dip in April’s headline PMI, which is likely due to the slowdown in the biomedical cluster, particularly in pharmaceuticals.

She added: “Within the global electronics industry, generative-AI related interest is perceived as the growth driver, whereas consumer electronics is still somewhat lagging.”

DBS’ Mr Chua said that there are uncertainties that could keep Singapore’s manufacturing recovery fragile. He said: “These include ongoing geopolitical tensions that could still disrupt supply chains, and economic policy uncertainties such as the timing and extent of the potential US interest rate cuts.”

UOB associate economist Jester Koh said the manufacturing sector’s overall recovery remains challenging in the near term, primarily due to softening demand amid high interest rates around the world.

“But the anticipated easing of financial conditions as central banks in major advanced economies begin to reduce policy rates towards the latter half of the year could provide some tailwind to global investment and consumption activity,” he added.