UPDATE 1-Singapore Jan factory activity expands after contraction

Thu Feb 6, 2014 4:57am EST

SINGAPORE Feb 5 (Reuters) - Manufacturing activity in Singapore expanded in January as new orders and new export orders grew, reversing from a contraction in December, an industry survey showed on Wednesday, despite slower growth in the U.S. and Chinese factory sectors.

The Singapore Institute of Purchasing & Materials Management's Purchasing Managers' index (PMI) rose to 50.5 last month from 49.7 in December, when the manufacturing sector contracted for the first time in 10 months.

A reading above 50 indicates that manufacturing sector activity is generally expanding, while levels below that point to a contraction.

"The electronics sector continued to expand for the 12th consecutive month. The readings indicated further growth in new orders from domestic and overseas markets," the institute said in a statement.

Singapore's PMI got a lift in January partly because some factory orders were diverted to Singapore due to the political turmoil in Thailand, said Janice Ong, executive director for the Singapore Institute of Purchasing & Materials Management.

"We cannot generalize but when we speak to some of the respondents, they do mention that," Ong said. She added that the electronics sector gained a boost but declined to go into specifics, citing confidentiality reasons.

The institute's PMI for the electronics sector advanced to 52.0 from December's 50.1.

The political risk may have led to some shift in production away from Thailand to Singapore, said Daniel Wilson, an economist for ANZ in Singapore.

"Even though it's likely cheaper to produce there, the political risk premium may be bringing costs closer together," he said.

"I haven't heard of spillovers into Singapore yet, but it doesn't altogether surprise me because the political unrest has been going on for roughly three months now," Wilson added.

To be sure, some economists were sceptical that any diverting of factory orders to Singapore from Thailand would have a major impact on Singapore's manufacturing sector as a whole.

"My personal feel is that the structure of the manufacturing sector in Singapore and Thailand is quite different," said Francis Tan, an economist for United Overseas Bank.

Manufacturers with a presence in Thailand said they were unaffected by the political turmoil in the country.

"We have not seen drop in orders in the past three months. We are doing okay and we normally get buying orders six months in advance," Pissamai Saibua, Chief Financial Officer of Thai electronics maker SVI Pcl, told Reuters.

Lotus Tan, a Singapore-based spokeswoman for hard-disk drive maker Seagate Technology Plc, also said the company's Thai operations were unaffected.

For more PMI reports from around the world, search [PMI M RTRS]