In December 2024, Singapore's private sector experienced a notable slowdown, marking its weakest growth in nearly two years. The decline was evidenced by the latest Purchasing Managers' Index (PMI) data released by S&P Global, which revealed a drop in the headline PMI to 51.5, down from 53.9 in November 2024.
Though this figure still indicates expansion, it is the slowest rate observed since July 2023, suggesting a concerning trend for the economy. The data signifies that firms in Singapore have begun to reduce employment and purchasing activities in response to diminishing demand and easing cost pressures.
Key metrics, including growth in output and incoming new orders, showed a marked deceleration, reaching their slowest levels since early 2023. This downturn underscores the challenges facing various sectors within the economy. Particularly noteworthy is the performance of the finance and insurance sectors, which led the overall gains.
Conversely, the manufacturing and construction industries reported declines, highlighting the uneven recovery across different sectors. As demand softened, the accumulation of backlogs also slowed significantly, revealing that unfinished work increased at the weakest pace in two years. Another vital aspect to consider is the employment levels, which fell marginally for the first time since April.
This reduction reflects diminished capacity pressure among firms, signaling a cautious approach to future hiring. Additionally, purchasing activity dropped at the most rapid rate observed in two years, with companies citing sufficient inventory holdings as the reason for the decline. Moreover, input cost inflation showed signs of slowing for the second consecutive month, predominantly due to easing purchase prices and lower shipping costs.
Similarly, the inflation of selling prices eased to a six-month low, although it remained above the long-term average. This trend indicates that while costs are easing, businesses still face challenges in maintaining steady pricing amid fluctuating demand. As both input and selling price inflation eased further, firms noted sufficient inventories coupled with declining shipping costs as influential factors.
Despite the apparent slowdown reflected in the PMI data, it is important to recognize that business confidence has surprisingly climbed above the average. Companies remain optimistic about improving sales in the upcoming year, suggesting resilience amidst current economic challenges..