Singapore PMI Edges Up to 51.4 in July Despite Middle East Supply-Chain Pressures

The headline and electronics readings were their highest since November 2018 and January 2018 respectively, noted DBS senior economist Chua Han Teng. Stephen Poh, executive director of the SIPMM, said the latest readings indicate that Singapore’s manufacturing sector remains buoyed by the AI-driven semiconductor supercycle, which is driving robust order inflows and employment.

However, the collapse of the Middle East ceasefire has triggered a supply chain crisis, sending input prices soaring and severely crippling supplier delivery times, he added. Chua said these tailwinds had more than offset pressures from higher energy costs and US tariffs.

Electronics new export orders rose to 52.6 in July, their highest since mid-2018. At the same time, the sector’s finished-goods index remained in contraction for a third consecutive month. UOB associate economist Jester Koh said this suggested that semiconductor demand was outpacing supply, with manufacturers drawing down inventories to meet rising orders.

OCBC chief economist Selena Ling similarly said that rapidly declining stocks of finished goods, together with rising orders, pointed to a supply crunch rather than a lack of demand. However, she cautioned that conditions were more nuanced among industries not related to AI and electronics.

Koh said supplier delivery readings deteriorated further in July as shipments were likely diverted from the Suez Canal and Bab el-Mandeb route, due to the re-escalation of the Middle East conflict, to the longer passage around the Cape of Good Hope. The rise in input costs was also more pronounced for overall manufacturing than electronics, reflecting higher energy prices alongside rising memory-chip prices.

Chua expects the chemicals cluster to continue to face headwinds in Q3, as Middle East tensions constrain feedstock supplies and limit any rebound in activity. Economists expect AI-related demand to continue supporting manufacturing in the near term, although its benefits may remain concentrated in electronics and related industries. “Strong hyperscaler investment in the second half of 2026 is expected to continue driving robust export demand for Singapore’s electronics products, including memory chips and server-related products,” Chua said.

Manufacturing conditions across the region generally improved in July, with Indonesia returning to expansion, and Thailand and the Philippines reaching multi-month highs. China’s indicators weakened, while Malaysia’s growth held steady.

China’s official PMI fell to 49.2 in July from 50.3 in June, slipping into contraction territory. The RatingDog China General Manufacturing PMI similarly eased to a four-month low of 50.9 from 51.7 in June. However, China’s manufacturing sector continued to expand in July, although growth in output and new orders moderated.

Thailand’s PMI rose to 54.2 from 53.6, its highest since December and well above its long-run average of 50.5. The Philippines’ PMI rose for a third straight month to a five-month high of 51.8, from 50.9 previously. Indonesia returned to expansion as its PMI climbed sharply to 50.2 from 46.9, while Vietnam’s reading rose to 52.9 from 51.8. Malaysia’s PMI was unchanged at 50.7.