Strong growth of Singapore's private sector business activity in September signals that momentum in the economy has accelerated in the third quarter. Rising output and order book inflows continued to support economic activity, with a revival of export sales at the end of the third quarter a particular highlight.

Strong demand

At 52.9 in September, the Nikkei Singapore PMI rose for the second successive month to the highest since February of last year.

Singapore economic growth

Production increased at the fastest pace since November 2015, driven by a strong upturn in new orders. The latest expansion in new business volumes was the largest since June 2014. Companies attributed the increase to stronger underlying client demand.

Growth in output and new orders outpaces job creation

Moreover, resurgent new export orders provided an additional tailwind. Foreign sales grew for the first time in seven months. Some survey respondents noted stronger overseas demand, notably from emerging markets.

Rising staff costs curb jobs growth

The rate of employment growth, however, has not yet responded to the increase in demand. September data indicated that staffing numbers grew more modestly than in August. The lower jobs growth can be partly linked to strong wage inflation, causing companies to monitor payrolls judiciously. The survey's Staff Costs Index signalled a sharp rise in average pay at the end of the third quarter.

Rising salaries restrain more hiring

Sources: IHS Markit, Nikkei.

As a result, companies' operating capacities were further taxed, with outstanding work increasing at the fastest rate in the four-year history of the series.

Meanwhile, latest survey data pointed towards greater overall cost burdens, which in turn led to higher selling prices as companies sought to protect their margins.

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