Singapore's manufacturing activity showed expansion in July, driven by a wave of demand linked to artificial intelligence. The Purchasing Managers' Index (PMI), compiled by the Singapore Institute of Purchasing and Materials Management, rose to 51.4 in July, slightly up from 51.3 in June. A reading above 50 indicates expansion, while below 50 signals contraction.

On Monday, the institute reported that the data reflects stronger growth in new orders, exports, input purchases, and employment, though factory output expansion slowed. Stephen Poh, Executive Director of the institute, noted that the latest PMI data suggests that Singapore's manufacturing sector remains supported by the AI-driven semiconductor supercycle, which is fueling robust order inflows and job growth.

"However, the breakdown of the ceasefire in the Middle East has triggered a supply chain crisis, leading to soaring input prices and severely weighing on supplier delivery times," Poh added. The electronics PMI, covering roughly one-third of Singapore's manufacturing output, edged up to 52.4 in July from 52.2 in June, driven by stronger expansion in new orders, new exports, factory output, input purchases, and employment.

In a recent report, Irvin Seah, Senior Economist at DBS Bank, said that global AI-related tailwinds should continue to support manufacturing growth. Seah added that robust investment by major technology companies is driving strong demand for electronics and precision engineering products, including memory chips, server-related items, and semiconductor equipment.