NEW data appears to offer a glimmer of hope that Singapore's flagging manufacturing sector has turned the corner.
The Singapore Purchasing Managers' Index (PMI), a monthly gauge of the sector's activity, posted a reading of 51.5 last month, an increase over June's 50.5. A reading above 50 indicates an expansion in factory activity; and below 50 points to a contraction.
Last month's higher reading was attributed to an increase in both domestic and export orders, as well as an uptick in production and inventory. Overall stockholdings of finished goods, imports and employment also expanded.
The data is compiled by the Singapore Institute of Purchasing and Materials Management from a survey of more than 150 firms.
Sentiment in the manufacturing sector - which makes up about a fifth of Singapore's economy - has cooled since the start of the year. Factory output inched up an estimated 1.5 per cent in the second quarter over the same period last year, well down from a breakneck year-on-year pace of 9.8 per cent in the first quarter.
Still, the PMI has recorded readings above 50 for seven consecutive months.
The PMI for the electronics sector - which makes up about a third of manufacturing output - rose 1.7 points last month over June to reach 52.4, its 18th consecutive month of expansion. UOB economist Francis Tan warned against being too upbeat, saying: "Not to pour water on this optimism, but the June to August period is usually a seasonal peak for the PMI due to an increase in orders for year-end sales."
He added that Singapore factories largely supply intermediate products to countries where consumption goods are assembled.
While the manufacturing sector is expected to grow at a more sedate pace over the rest of the year, partly due to a high base in the second half of last year, the "general outlook still appears to be improving" given recent encouraging economic data from the United States, added Mr Tan.
Other countries in Asia also seem to be feeling the lift from recovering global activity.
China's official PMI rose to 51.7 last month, its highest in 27 months. Taiwan's reading hit a three-year high last month while Indonesia maintained its highest reading on record.
Across the region, growth in new orders suggests the expansion will persist for a while, said Mr Frederic Neumann, the co-head of Asian economic research at HSBC. "It is important, however, not to get too carried away. For one thing, structural challenges persist in many economies that only determined reforms will be able to overcome."
This article was first published on August 5, 2014.
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