Singapore PMIs (October) remained in the red

PMIs (October) remained in the red. Though both overall manufacturing and electronics PMIs registered some improvements, both indexes are still in the contraction mode (below 50). Overall manufacturing register 48.9, up marginally from 48.6 in September. 

Electronics PMI inched higher by 0.1 to 48.6. Sub-indexes for new orders, production were higher while inventory levels have eased. These are essentially some signs of modest improvement in the sentiments of manufacturers. That said, stocks of finished goods have continued to rise, reflecting a steady build-up in unsold stocks amid weak demand. And sub-indexes for imports and employment are also trending lower, suggesting certain degree of cautiousness on the part of the manufacturers and the reluctance to ramp up production. 

Unlike what many had predicted earlier in the year, outlook for the global economic has in fact deteriorated. The US economy is still struggling with its tepid recovery and China is decelerating. There is simply a lack of growth impetus in the global economy that could potentially lift the manufacturing out of its doldrums in a sustained way. 

And beyond the cyclical drag, the manufacturing is weighed down by structural challenges. External competition, continued increase in business costs and manpower shortage are eroding the medium term prospects of the sector. The GDP share of manufacturing has fallen from 26% in 2004-06 to just 17% in 2013- 2014. At the current pace of decline, the sector would become irrelevant before long.