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Singapore's manufacturing sentiment gauge rises by 0.2 point to 50.5 in October
SINGAPORE factories are tipped for more growth in October, as the Purchasing Managers' Index (PMI) reading touched a recent high of 50.5 points.
The early gauge of manufacturing sentiment inched up by 0.2 point on the month before, marking its fourth straight month of growth.
The latest PMI reading - its strongest showing since March 2019 - came on faster growth in new orders, new exports and factory output, according to the Singapore Institute of Purchasing and Materials Management (SIPMM), which compiles the data.
Meanwhile, the linchpin electronics industry extended its winning streak for the third month. The PMI reading ticked up by 0.1 point to reach 51.0 points in October, also on growth in new orders, new exports and factory output.
Readings above 50 points indicate expansion, while those below point to contraction.
Overall readings for inventory, finished goods, imports, input prices and order backlog were all in the black, even as both overall and electronics employment readings posted slower rates of contraction for the month.
The overall employment index has been negative for nine months but still increased by 0.3 point to 49.2, while electronics employment rose by 0.2 point to 49.8.
As such, electronics employment may be bottoming out and could move towards an expansion, the SIPMM suggested in its report.
Sophia Poh, its vice-president of industry engagement and development, noted that October's PMI "is an affirmation of the recovery for the overall manufacturing sector".
"However, manufacturers are increasingly concerned about the uncertain geopolitical developments as well as new waves of the global pandemic, which could dampen global demand and thus derail the manufacturing recovery," she added.
Economist Barnabas Gan from UOB also called the data "relatively more encouraging", citing how new orders expanded since September after eight months of contraction.
"Overall, the higher readings in both manufacturing and electronic PMIs signal that a recovery is taking place, while recent high-frequency data points towards a relatively better economic environment in Q4 2020," he said in a note.
Mr Gan added that "there are also nascent signals for a recovering labour market", which he believes could turn around in the fourth quarter.
Broadly speaking, Singapore's factory outlook has "reinforced the global and regional manufacturing PMI picture", according to Selena Ling, head of treasury research and strategy at OCBC.
"The key question still remains if the domestic manufacturing and electronics growth momentum will sustain into Q1 2021, given that inventory gauges are falling - albeit still in expansion territory - and stocks of finished goods are also rising, whilst input prices are also picking up, indicating that costs are also increasing."
The trend was not limited to Singapore, with Barclays' research team noting increased cost pressures for manufacturers across the rest of emerging Asia (EM Asia) as well.
"In our view, shortages of raw materials and higher transport costs are reasons behind the upward cost pressures, while new product launches and the year-end festive season further pushed up transportation costs," Barclays analysts wrote on Monday.
They added that "sectors such as tech continue to buoy overall shipments, while the outlook for non-tech exports is mixed", which could dampen the employment outlook.
EM Asia data suggests "a K-shaped two-speed recovery", according to the Barclays team, which believes that the rebound is being led by the North Asian economies of mainland China, Taiwan and South Korea.
China's private-sector Caixin manufacturing PMI, which is weighted towards smaller, export-oriented companies, rose by 0.6 point to 53.6 for the month.
Yet, closer to home, IHS Markit's PMI reading for the Asean manufacturing sector was in the negative zone at 48.6 points, up from 48.3 before.
The continued contractionary showing pointed to "a moderate deterioration in the health of the Asean goods-producing sector", IHS Markit said, adding that industry conditions "remained challenging in October".