Singapore: PMI points to transitory weakness – UOB

UOB economist Jester Koh highlights that Singapore’s electronics PMI rose in August, with broad-based gains in new export orders, output and backlogs. Koh argues recent softness in electronics NODX and IP likely reflects capacity constraints rather than weaker end demand, and suggests inventory drawdowns and AI-related tailwinds should support future electronics production.

Electronics PMI signals resilient demand

"Singapore's electronics PMI rose 0.2pt to 52.6 in Aug, with broad-based improvements in new export orders (Aug: 52.8, Jul: 52.6), output (Aug: 52.5, Jul: 52.2), stock of input purchases (Aug: 52.6, Jul: 52.4) and order backlogs (Aug: 52.8, Jul: 52.5), reflecting strengthening AI-related tailwinds amid the global agentic AI capex buildout."

"The stronger Aug electronics PMI suggests that recent weakness in electronics NODX and IP likely reflects capacity constraints rather than softening end demand, further evidenced by the continued decline in the stocks of finished goods sub-index (Aug: 49.0, Jul: 49.3), indicating that firms are drawing down existing inventories to meet rising demand."

"This should support electronics IP in the months ahead given the eventual need for inventory replenishment."

"The re-escalation of the Middle East conflict since Jul led to a further deterioration in the supplier deliveries subindex (overall: 47.5 from 47.8; electronics: 47.3 from 47.6), with lead times lengthening as some cargo shipments were likely diverted from the Suez Canal/Bab el-Mandeb Strait route to the Cape of Good Hope."

"The input price sub-index for both the overall (Aug: 51.8, Jul: 51.6) and electronics PMI (Aug: 53.0, Jul: 52.7) increased, reflecting the surge in energy prices in Aug, although the increase was more pronounced in the latter, likely reflecting tech-flation pressures associated with the global chip shortage."