SINGAPORE — The Republic’s factories posted their strongest growth in a year last month, as demand for items such as personal computer parts and disk drives quickened, signalling a more robust recovery in the overall manufacturing economy.

The Purchasing Managers’ Index (PMI), which measures manufacturers’ activities and sentiments, remained in expansionary territory for the seventh consecutive month, rising to 51.5 last month from 50.5 in June, figures released yesterday by the Singapore Institute of Purchasing and Materials Management (SIPMM) showed. Last month’s reading was the highest since July last year.

“Higher new orders and new export orders as well as higher levels in production and inventory” had led to the overall increase in the PMI, the SIPMM said. Readings above 50 indicate expansion.

Economists welcomed the data as a sign that Singapore’s manufacturing sector, which has been in the doldrums as a result of economic restructuring, could see a more sustained recovery in at least the near term.

Mr Daniel Wilson, an ANZ economist, said: “We could be in store for a cyclical upturn into the second half of this year, in line with the more positive GDP data from China and jobs data from the US recently. This is the first data we’ve had for the third quarter — hopefully it proves that the second quarter’s slowdown was more transient than sustained.”

Mr Leong Wai Ho, a Barclays senior economist, is similarly upbeat, saying: “It is the clearest indication that Singapore is still leveraged to the improving US capex cycle. The rising trend in US ISM new orders, semiconductor book-to-bill and the local PMI confirms that like our larger peers in north-east Asia, manufacturing in Singapore should see significantly stronger momentum in the third quarter. And that pick-up is likely to be tech-led.”

The PMI data yesterday showed the electronics sector — which makes up one-third of Singapore’s manufacturing — reported an overall PMI of 52.4 last month, up from June’s 50.7, to reach the highest reading since April 2011. The sector saw its new orders and new export orders indices increase to 53.5 and 52.7, respectively, reflecting the ongoing improvement of external conditions.

This partly reflects an improving PC demand, which is trickling down to local manufacturers, said UOB economist Francis Tan. “Earlier this month, Gartner said the global PC market is going through a revival this year, with a much smaller 2.9 per cent contraction on the cards after last year’s 9.5 per cent decline. Our PC-centric industries may be gearing up for that,” he said.

“But typically PMI figures in the second half will see a seasonal upswing and the fundamental outlook may not be without challenges,” Mr Tan added. “The biggest issue for the manufacturing and economic outlook remains the supply-side constraints, in terms of the impact of restructuring, tight manpower and rising wage costs.”

OCBC economist Selena Ling agreed that the economic restructuring has indeed created further headwinds for Singapore’s economy, but stressed that the pains are necessary. “It’s still premature to conclude whether the restructuring is a success — given that we’re still shy of the half-way mark of a decade-long exercise,” she said.

“But as a small and open economy, change is inevitable if we are to stay competitive. Hopefully, in the second half of the exercise, we will see better productivity gains.” WONG WEI HAN