Singapore’s October PMI slips to 51.4 as new orders and employment growth slow

Singapore’s manufacturing sector expanded at a slower pace in October as growth in new orders, factory output and employment eased. It was the first slowdown in the pace of expansion since March this year.

Economists said capital spending on artificial intelligence (AI) remained robust, providing support for Singapore’s manufacturing sector. The country’s industrial base also extends beyond chips, meaning the impact on manufacturing should remain manageable even if the AI investment boom cools.

The Singapore Institute of Purchasing and Materials Management (SIPMM) said in a report released on Monday (2 November) that Singapore’s manufacturing Purchasing Managers’ Index (PMI) fell 0.3 points from September to 51.4 in October. Nevertheless, the country remained in expansion for the 15th consecutive month.

A reading above 50 indicates that manufacturing is expanding, while one below 50 signals contraction.

The slower expansion was mainly due to easing growth in new orders, factory output, input inventories and employment. Growth in imports and order backlogs also slowed.

Meanwhile, finished goods inventories contracted at a slower pace. The supplier deliveries index also contracted much more slowly, reflecting an easing of delivery delays.

The future business index remained in expansion territory, although at a slower pace. This indicates that businesses remain confident about near-term business conditions despite cost pressures and supply chain uncertainty.

SIPMM executive director Stephen Poh said October’s PMI showed that manufacturing was gradually cooling from a high base rather than losing growth momentum. Strong exports, AI-related orders and persistently high order backlogs continued to underpin the electronics sector’s role as a mainstay of manufacturing.

However, Poh also noted that output growth continued to lag order growth, while rising input costs would put pressure on manufacturers. Although supplier delivery delays were easing, he said if disruptions to shipping in the Middle East occur again, it could cast another shadow over production.

Meanwhile, the electronics PMI fell 0.4 points from the previous month to 52.5 in October, indicating that the sector continued to expand, but at a slower pace.

According to the report, supply conditions in the electronics sector improved, with shorter supplier delivery times. The sector’s future business index also remained in expansion territory for the 16th consecutive month, reflecting continued optimism among businesses.

OCBC chief economist Selena Ling said recent volatility in global stock markets showed some unease among investors about the sustainability of the global AI investment boom. Markets were also taking a closer look at which companies could turn AI investment into actual returns, and which were expanding capacity indiscriminately.

But she said the impact on Singapore should be limited even if growth in the global AI cycle slowed. Singapore’s industrial base extends beyond semiconductor production to include semiconductor equipment, precision engineering, components, data storage and advanced manufacturing services. These areas can provide some resilience for Singapore’s economy, as investment cycles differ slightly across parts of the supply chain.

“Beyond the immediate future, the global push for supply-chain diversification due to heightened geopolitical and policy risks, as well as the data-centre and power infrastructure build-out, should still create growth opportunities for the Singapore economy.”

DBS senior economist Chua Han Teng said recent earnings reports from major US hyperscale cloud service providers showed that AI capital spending would remain strong for the rest of the year, continuing to support manufacturing.