Business growth softens as input costs, supply delays hit firms: analysts

PMI slipped to 55.4 from 57.4 in October.

Business conditions improved for the tenth straight month in November, but growth softened amidst rising input costs and supply pressures.

‘Purchasing Managers’ Index’ fell to 55.4 in November from 57.4 in October, marking the softest expansion in three months, according to an S&P Global report.

The softer index reflected constraints caused by higher input costs, lower selling prices, and transportation and labour issues, despite strong activity, said José Torres, senior economist at Interactive Brokers.

“A sharp rise in new orders, driven by successful marketing and new projects, caused businesses to increase their purchasing and hiring, which contributed to the overall increase in activity,” Torres added.

Margin pressures will have to be monitored, with selling prices falling as overall input cost inflation rose to a ten-month high, said Jingyi Pan, economics associate director at S&P Global Market Intelligence. Input costs rose at the sharpest rate since January due to higher purchase prices and wages.

Supply constraints also remained elevated midway through the final quarter of the year.

Financial performance has come under pressure, with a Singapore Business Federation survey showing that only 4% of firms saw improved profitability over the past 12 months, whilst 34% reported a decline. Logistics and supply-chain costs contributed to tighter margins.

Key issues include shipment delays, longer supplier lead times, and inventory depletion caused by transport disruptions and labour shortages. These issues contributed to a decline in the stocks of purchases.

Nevertheless, business activity recorded its fastest increase since October 2022, supported by higher new orders driven by new project launches and marketing campaigns. Construction registered the strongest output gains amongst sub-sectors.

“Forward-looking indicators, including the new orders, backlogs of work and future output indices, outlined the likelihood of continued business activity growth in the coming months,” Pan added.