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By: GABRIEL CHEN (FINANCE CORRESPONDENT)
Publication: The Straits Times 02/03/2011



THE manufacturing sector has put on its strongest showing in over a year, with an index of factory activity expanding for the fifth straight month.

The purchasing managers' index (PMI), which points to factory orders in the upcoming months, was at 52.3 points last month, up from 50.5 points in January.

As the manufacturing sector continues its impressive rebound, this is the strongest growth since December 2009.

Analysts say the latest reading confirms that Singapore's factories have picked up momentum in the new year.

The PMI, compiled monthly by the Singapore Institute of Purchasing and Materials Management, indicates expansion with a reading above 50, and contraction when the reading is below 50.

Citigroup economist Kit Wei Zheng said: "It basically reaffirms our long-held view that the manufacturing sector, especially outside of biomedicals, is seeing re-accelerating momentum after the soft spot in the third quarter, and that's evident in both production and new export orders."

The latest increase in the PMI was attributed to stronger electronics output and increased export orders.

The index of the electronics sector, a key pillar of manufacturing, posted a reading of 52.6.

This was 1.8 points higher than in the previous month and marked the fourth straight month of expansion.

The electronics sector data indicated strong growth in new orders from both the home and overseas markets, as well as a higher level of production output.

Standard Chartered economist Alvin Liew said: "The recovery in G-3 markets – Japan, the European Union and the United States – has been stronger than expected, while demand in the new emerging-market space is being sustained."

The institute's data showed the index of input prices, which includes prices of things such as components used in an end product, gained 2.1 points to 54.7 last month.

This may reflect the impact of rising commodity prices, said Bank of America Merrill Lynch economist Chua Hak Bin.

He said manufacturing numbers may hold up in the first quarter, but slow down more significantly in the second.

OCBC Bank economist Selena Ling said last month's mixed manufacturing PMI readings elsewhere in the region – mainland China (52.2, down from 52.9), Taiwan (55.8, down four points) and India (57.9, up 1.1 points) – suggest post-Chinese New Year growth momentum may not be all smooth-sailing, though contraction is unlikely.