Singapore production slows in August and faces supply chain disruptions

Singapore's manufacturing sector may face supply chain disruption due to new COVID-19 restrictions in Asian region as infection rates continue to rise.

SIPMM's (Singapore Institute of Purchasing and Materials Management) analysis showed that The Singapore purchasing managers' index (PMI) fell slightly to 50.9 in August from 51 in July as new export orders and production grew at a slower pace compared with the previous period.

At the same time, the August SIPM PMI is marking the 14th straight month of growth. A PMI reading above 50 indicates growth in the manufacturing economy.

"The decline in overall manufacturing PMI in Singapore is likely due to a slightly softer external environment, as evidenced by slower growth in new orders, new exports and industrial production," said Bernabas Gan, economist at UOB Global Economics & Markets Research in   Singapore.

The decline in Singapore's manufacturing PMI was in line with most of Asia in August, reflecting a slowdown in production growth in the region due to restrictions put in place to contain further COVID-19 outbreaks.

In addition, we can see that the private sector manufacturing PMI reading for Singapore by financial information services provider dropped till 52.1 in August from 56.7 in July.

Further easing of COVID-19 restrictions in August provided impetus for demand and business activity, with new orders and production volumes growing for the ninth straight month, although the rate of growth has eased from July's highs.

All of this must be considered against a backdrop of continued supply constraints and it is worth watching for any long-term impact on output.

However, aside from the flare-up of vaccine-resistant COVID-19 infections in Singapore, the manufacturing sector is expected to be one of the core components of the country's growth, Gan said.

He also added that Singapore's export-oriented industries are expected to be driven by the growth in global trade, which should subsequently benefit external sectors such as manufacturing, wholesale trading and financial services.