[SINGAPORE] The Republic\u2019s factory activity expanded at a slightly faster pace in July, supported by the continuing artificial intelligence-related upcycle, even as the prolonged Middle East crisis intensified supply-chain pressures.\u00a0<\/p>\n
The Purchasing Managers\u2019 Index (PMI) edged up 0.1 point from June to 51.4 last month, data from the Singapore Institute of Purchasing and Materials Management (SIPMM) showed on Monday (Aug 3).<\/p>\n
This marks 12 straight months of expansion. A reading above 50 indicates expansion, while one below 50 indicates decline.<\/p>\n
Within manufacturing, the PMI for the linchpin electronics sector grew by 0.2 points to 52.4, marking the 14th consecutive month of expansion.<\/p>\n
The headline and electronics readings were their highest since November 2018 and January 2018, respectively, noted DBS senior economist Chua Han Teng.<\/p>\n
Stephen Poh, executive director of the SIPMM, said the latest readings indicate that Singapore\u2019s manufacturing sector remains buoyed by the artificial intelligence-driven semiconductor supercycle, which is driving robust order inflows and employment.<\/p>\n
\u201cHowever, the collapse of the Middle East ceasefire has triggered a supply chain crisis, sending input prices soaring and severely crippling supplier delivery times,\u201d he added.<\/p>\n
Outlook<\/p>\n
Economists expect AI-related demand to continue supporting manufacturing in the near term, although its benefits may remain concentrated in electronics and related industries.<\/p>\n
Chua said these tailwinds had more than offset pressures from higher energy costs and US tariffs.\u00a0<\/p>\n
\u201cStrong hyperscaler investment in the second half of 2026 is expected to continue driving robust export demand for Singapore\u2019s electronics products, including memory chips and server-related products,\u201d he added.<\/p>\n
Separately, electronics new export orders rose to 52.6 in July, their highest since mid-2018.\u00a0At the same time, the sector\u2019s finished-goods index remained in contraction for a third consecutive month.<\/p>\n
UOB associate economist Jester Koh said this suggested that semiconductor demand was outpacing supply, with manufacturers drawing down inventories to meet rising orders.<\/p>\n
\u201cThis should continue to keep electronics manufacturing supported in the months ahead,\u201d he said, although this would depend on manufacturers\u2019 ability to expand production capacity.<\/p>\n
OCBC chief economist Selena Ling similarly said that rapidly declining stocks of finished goods, together with rising orders, pointed to a supply crunch rather than a lack of demand.\u00a0<\/p>\n
However, she cautioned that conditions were more nuanced among industries not related to AI and electronics.<\/p>\n
The near-term outlook nevertheless remained positive.\u00a0<\/p>\n