SINGAPORE – Growth among factories in Singapore continued to cool last month amid weaker production output and order volume, but with the electronics sector showing some signs of recovery, economists are painting a more optimistic picture for the manufacturing sector in the second half of the year.

The Purchasing Managers’ Index (PMI), which measures manufacturers’ activities and sentiments, eased for a second consecutive month to 50.5 in June from 50.8 in May, figures released today (July 2) by the Singapore Institute of Purchasing and Materials Management (SIPMM) showed.

While the reading remained above the 50-mark that separates expansion and contraction for the sixth straight month, lower new orders and new export orders proved to be a drag on the overall manufacturing economy in June.

In comparison, much of Asia recorded solid increases in activity last month.

Ms Selena Ling, head of treasury research and strategy at OCBC said: “The picture (for the manufacturing sector in Singapore) continues to be somewhat mixed compared with other recent regional PMI readings, which suggest greater resilience. For instance, Taiwan’s PMI clocked in at 54 in June, the highest since February.”

That said, there is no cause for alarm and the sector should pick up somewhat in the later part of the year, said Credit Suisse analyst Michael Wan.

“These numbers reflect more on what has already happened in the second quarter, which is set be the weakest sequentially this year for industrial activities,” he said. “Moving forward, I see good reasons to expect better performance. These include the more accommodative monetary policies being rolled out by the European Central Bank to encourage lending, while US growth should continue to pick up after first quarter’s aberration.”

The SIPMM data showed new export orders index narrowed to 51.2 last month from 52.4 in May, underscoring the recent weakness seen in overseas shipments of locally-produced goods. Taking analysts by surprise, non-oil domestic exports (NODX) had dropped by a sharp 6.6 per cent in May from a year earlier, reversing a 0.9 per cent expansion seen in the previous month, on weaker demand for both electronics and non-electronics products, official data released earlier in June showed.

But in today’s SIPMM data, the PMI for the electronics sector bucked the trend with a reading of 50.7 in June, up from 50.4 in May, with new export orders improving for a second straight month to 51.9.

“These are encouraging signs following the decline of electronics’ manufacturing output in recent months. The optimism is backed by improving manufacturing activity in China, where PMI has improved to the expansionary zone for the first time since January to 50.7 in June. That’s important because a lot of our electronics output goes to assembly lines in China,” UOB economist Francis Tan said.

“With things potentially looking up for electronics manufacturing, I don’t expect overall PMI to drop below 50 this year,” he added. “We forecast full-year industrial production to grow 3.5 per cent on-year, doubling 2013’s 1.7 per cent growth.”