SINGAPORE'S factory output likely expanded last month, as manufacturers here started gearing up for an expected jump in demand ahead of the festive season.
An early indicator of manufacturing activity rebounded in September, after faltering in August.
The Purchasing Managers' Index (PMI), released yesterday, was pushed up by higher new orders, new export orders, output and imports.
"This likely reflects an increased order flow from the United States as major retailers stock up for the pre-Christmas sales pickup," said Barclays economist Leong Wai Ho.
Electronics makers, in particular, look to have cranked up production and stepped up their imports, including of raw materials, on the back of higher demand.
While the overall PMI rose to 50.5 from August's 49.7 reading, the electronics PMI jumped to 51.9 last month from 50.7 in August. A reading above 50 indicates growth.
Mr Leong said the better electronics reading "reflects brisk global sales of game consoles and the recent launch of Apple's iPhone 6".
He added: "The pickup in purchasing activity for electronics also shows that North Asian plants are running out of capacity and that the orders are starting to reach smaller plants in South-east Asia."
OCBC economist Selena Ling noted that the PMI's "pleasant surprise" yesterday follows other recent positive data that hints at manufacturers "turning more bullish".
Both exports and manufacturing output rose in August over a year ago, while manufacturing loans also started growing again in August, she said. But Ms Ling also warned against reading too much into the PMI's rise last month from August, given that August's dip could have been an "aberration".
Similar caution was expressed by DBS economist Irvin Seah, who observed that last month's PMI reading of 50.5 was not much changed from the average reading of 50.6 for July and August.
"Although we see an uptick, frankly, I wouldn't view it as an improvement, just back to trend," he said, adding that the pickup in electronics is likely a temporary festive-season bump rather than a sustained improvement.
"This is consistent with our view that the outlook of the manufacturing sector is fairly flat and tepid."
Indeed, Mr Seah believes this year will turn out to be a "relatively lacklustre year for manufacturers" - partly because of a lack of strong cyclical improvement in the global economy, and also because manufacturing companies are struggling with the restructuring process.
This article was first published on October 2, 2014.
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