SINGAPORE - Singapore’s manufacturing output picked up in August as concerns around the impact of US tariffs mellowed.

The official purchasing managers’ index (PMI) – a barometer of the industry’s health – rose from 49.9 points in July to 50 points.

The electronics sector, which accounts for around 40 per cent of overall manufacturing output, was a bright spot. It recorded a PMI of 50.4, up from

50.2 in July

, marking its third straight month in expansion territory.

A PMI reading above 50 indicates growth; one below suggests a contraction in output.

“The current Singapore PMI of 50 is a significant threshold coming on the heels of a contraction,” Professor Lawrence Loh, from the department of strategy and policy at NUS Business School, told The Straits Times.

“It shows that the uncertainty over global trade frictions and US tariff volatility has somewhat stabilised. It is a sign of quiet confidence for exports, which is a critical mainstay for the open economy of Singapore,” he added.

Even so, there are risks to the manufacturing outlook. The scope of US tariffs on semiconductors and pharmaceuticals – major exports from Singapore – remains uncertain, UOB associate economist Jester Koh said.

He added that front-loading, where advance orders are made to prepare for the prospect of higher tariffs, could also be a drag on exports in the months to come.

Maybank economist Brian Lee said the electronics sector was buoyed by an earlier announcement made by US President Donald Trump.

Mr Trump had said in August that companies with manufacturing facilities or commitments to manufacture in the world’s largest economy

would be exempt from 100 per cent tariffs on chip imports

.

“Global electronics demand will continue to be supported by the artificial intelligence (AI) boom, which has significantly increased demand for servers, chips and other components. Singapore’s electronics sector will continue to gain from broadening AI demand,” Mr Lee said.

The broader manufacturing reading was driven by a faster expansion rate in new exports, new orders and input purchases. Finished goods, imports and supplier deliveries also grew.

Order backlogs continued to grow, although at a slower pace. Factory output and employment contracted at a slower rate.

Meanwhile, a sub-index reflecting manufacturers’ expectations of business conditions ahead remained in contraction territory and shrank at a faster rate in August.

“Firms remain relatively cautious amid US tariff policy uncertainty, as contractions in the future business index and the employment index indicate,” Mr Lee said.

Despite this, he said, Maybank is expecting a resilient second half for the manufacturing industry that will support its 3.2 per cent growth forecast for the Singapore economy in 2025.

This is higher than the Ministry of Trade and Industry’s full-year projection, which was

raised in August to 1.5 per cent to 2.5 per cent

.

Mr Lee added: “Higher tariffs for US trading partners in the region from August could impact supply chains and lead to a slower pace of expansion in exports and manufacturing.

“However, Singapore may benefit from a diversion in export orders, given that its reciprocal tariffs at 10 per cent stand at the lowest in Asia.”

Private surveys showed that US tariffs

were taking a toll on factory activity elsewhere in Asia

, hitting indicators in Japan, South Korea and Taiwan, reports on Sept 1 said.

China has bucked the trend. A PMI index compiled by S&P Global rose from 49.5 in July to 50.5 in August, beating market expectations.

This stood in contrast to an earlier official reading which showed that Chinese manufacturing activity contracted for a fifth straight month on weak domestic demand, and uncertainty over its trade relations with the US.

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