SINGAPORE – Factory activity here continued to expand in October but at a slower pace because of factors including a slight decline in new orders.
Singapore’s purchasing managers’ index (PMI) – a barometer of the manufacturing industry’s overall health – fell to 51.4 points in October, from 51.7 points in September.
The electronics sector, which accounts for 40% of Singapore’s manufacturing output, recorded a PMI of 52.5 points. This was lower than the 52.9 points it posted in the previous month.
A PMI reading above 50 indicates growth, while one below that signals contraction.
Although the benchmarks remain in expansionary territory, they represent the first pullback in the broader PMI reading in seven months and in the electronics PMI since October 2025, OCBC chief economist Selena Ling noted.
Still, she said: “Growth momentum may be taking a breather rather than flagging an outright and imminent reversal of the global artificial intelligence-related capital expenditure boom.”
Meanwhile, input prices saw slightly faster growth, and finished goods inventories contracted at a slower rate. The supplier deliveries index contracted much more slowly, indicating that delivery delays have eased.
Stephen Poh, executive director at the Singapore Institute of Purchasing and Materials Management, which compiles the monthly survey, also said the readings pointed to a manufacturing sector that was “cooling from a high base, not losing momentum”.
He said: “Strong exports, AI-linked orders and elevated backlogs keep electronics the main pillar of manufacturing growth.
“However, output still lags orders, and higher input costs weigh. Easing supplier delays help, but renewed Middle East shipping disruption could constrain output.”
Other analysts agreed that it was premature to conclude that the manufacturing sector was set for a prolonged slowdown.
The moderation in October was driven by slower growth in new orders, with an index tracking the measure declining by 0.1 points from September.
However, the new export orders index rose by 0.1 points over the same period, indicating that demand remains robust, said Maybank economist Brian Lee.
For the electronics sector, the 0.3-point fall in the output index and the 0.5-point decline in the stocks of input purchases index were more significant, as they “could point to supply constraints”.
In China, a recent government survey showed that factory activity contracted in October, marking the third contraction in four months. The reading was weighed down by soft domestic demand for goods and signs of weakness in Chinese exports.
Manufacturing activity also slowed while continuing to expand in October in Japan, South Korea and Taiwan, according to private surveys.
This has raised concerns that the persisting Middle East conflict may be offsetting the benefits from the robust global demand for chips and AI-related goods.
Oxford Economics senior economist Sheana Yue said she will be watching developments across the regional electronics supply chain, particularly export performance in Taiwan and South Korea, and global semiconductor sales, in the months ahead.
“These provide useful signals of underlying demand for electronic components and semiconductors, which have been an important source of strength for Singapore’s manufacturing sector,” she said. Yue added that she expects AI-related demand to continue to support Singapore’s exports and investment.
“We have raised our GDP growth forecast to 5.7% for 2026 and expect growth of 4.3% in 2027. A sustained slowdown in electronics demand would pose a downside risk to this outlook, particularly if it also feeds through to investment and hiring,” she said.
Jonathan Koh, senior economist and FX analyst for ASEAN at Standard Chartered, noted that manufacturing activity may continue to moderate over the coming months, as it had a strong run-up so far in 2026.
Even so, he added: “We do not currently see signs of a sharp downturn. Electronics new orders remain strong, while finished goods inventories are still contracting, suggesting that underlying demand remains healthy, and that some inventory rebuilding may still be required.”
