The Nikkei Singapore Purchasing Managers’ Index (PMI) fell from 53.0 in July to 51.1 in August, marking the weakest pace of improvement since the middle of 2017. The private sector lost further momentum due to slower output and new orders and declines in export sales.
Output growth eased for a second straight month in August and was the slowest seen so far this year. Inflows of new business also rose at a weaker pace. Notably, overseas sales fell further in August, with the rate of decline the steepest for two years.
“With softer client demand, firms were reluctant to add jobs, particularly when capacity pressures remained modest,” IHS Markit said. Employment levels were largely stagnant in the middle of the Q3, whilst the rise in backlogs was noticeably less sharp than those seen in the first half of 2018.
“Employment was broadly stagnant after nearly a year of job creation. More worryingly was a further decline in export sales, which reflected softer global trade conditions. That said, improved business confidence suggests that the current slowdown in economic growth could be temporary,” said IHS Markit principal economist Bernard Aw.
“Firms cut back on purchasing activity, with anecdotal evidence pointing to sufficient inventories to meet current demand and slowing sales as reasons for the reduction,” IHS Markit added. The fall in buying levels was the sharpest seen in the six-year survey history. Stocks of purchases also fell, with the pace of decline the most marked since January 2017.
Despite the reduced appetite for inputs, suppliers’ capacity came under pressure. Delivery delays were reported in August, but the rate of deterioration in vendor performance was marginal.
In August, input prices rose at the weakest rate so far this year, with cost inflation noticeably lower than the average seen over the first half of the year. Paid prices for inputs rose slightly, whilst wage inflation slowed further. At the same time, increased costs prompted firms to raise selling prices, albeit marginally.