Singapore economy sees lower manufacturing due to US-China trade row

Manufacturing contracts in Singapore economy by 0.4 points

After 2.5 years of manufacturing growth, Singapore economy saw its manufacturing contract by 0.4 points to 49.9 points (in Singapore's Purchasing Managers' Index (PMI) terms) in May 2019. In fact, this is the first time Singapore economy had its PMI index below 50 since August 2016. A PMI index reading of below 50 means a decline in the country’s manufacturing sector, whereas a reading above 50 means expansion. 

However, this decline is nothing new as the overall PMI have been declining for 12 months (out of 15 months).

In the manufacturing sector itself, the Singapore market saw the electronics sector’s PMI contract again for the 7th consecutive month by 0.1 points (to 49.4 points). 

Reasons for manufacturing decline in the Singapore market

There are 2 reasons for manufacturing contraction in the Singapore economy:

1. The heightening of the US-China trade war, which in turn has damaged China’s growth prospects and lowered China’s demand for Singaporean manufactured goods. 

2. The worldwide decline in technology demand and the technology war between US and China.

Due to the ongoing US-China trade war, CMC market analyst Margaret Yang expects production and exports to remain weak in the upcoming months – especially because of the implementation of additional tariffs around late May to early June.

Consequently, only a mere 28% of industrial firm CEOs in the Singapore market are expecting this year’s revenue growth to exceed 2% (compared to 48% of global CEOs).

Recommended actions to recover from economy fallout

Because of the declining performance of the Singapore economy due to the US-China trade dispute, the Singapore market is urged to focus on two things:

1. Improving the workforce 

2. Restructuring the economy

By doing these two actions, Singapore Prime Minister Lee Hsien Loong believes that the Singapore economy will have the capability to produce and recover when external conditions improve. 

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