Singapore's factory output fell by a larger-than-expected 12.6 per cent last month as the volatile drugs sector reversed September's strong gain to post an equally emphatic slide.

Overall, the manufacturing sector performed well below consensus expectations of an 8.1 per cent decline in October - and did far worse than the surprise 2.4 per cent gain notched up in September.

Almost every sector shrank on the back of weaker global demand, according to the figures released on Wednesday by the Economic Development Board (EDB).

With manufacturing back in the red, economists say that a deeper recession in Singapore is expected.

Economists have been looking to the unpredictable pharmaceuticals sector for some respite for the economy as its demand is not fixed to the global cycle.

In September, a shock 44.4 per cent gain led to factory output turning positive. But last month, drug output plunged 31.2 per cent which the EDB attributed to a different mix of active drug ingredients.

Barclays Capital's Leong Wai Ho said: 'The pharma rebound that we're hoping for is not going to materialise till much later. This could be because pharma companies choose to book more revenue in the coming year and also continued delays in drug approvals.'

The electronics sector slid for a third straight month, shrinking 14 per cent, just a whisker better than the 14.6 per cent contraction in September.

This was led by a 56.6 per cent fall in the production of consumer electronics such as handphones, as factories continue to be relocated away from Singapore to lower cost centres.

Motorola announced in April that it would shut down its handphone-making plant at Ang Mo Kio by the end of the year, cutting about 700 jobs with it.

Chemicals also fell 5.8 per cent on lower demand and maintenance shut downs in petrochemical plants, said EDB.

Only transport engineering and general manufacturing, such as food and beverage industries, grew last month, at 10.9 per cent and 2.9 per cent respectively.

Excluding the biomedical sector, of which pharmaceuticals is a part, factory output declined by 6.8 per cent, more than September's 4.5 per cent decrease.

Factory output fell 12.7 per cent on a seasonally adjusted basis from September suggesting that the technical recession is likely to continue into the fourth quarter.

'The deepening slump in electronics... will have knock on effects on employment and exports,' Citigroup economist Kit Wei Zheng said. 'The underlying trend of a manufacturing recession remains intact.'

Morgan Stanley's economists said the forward looking new orders index for United States factory ouput 'has yet to find a bottom' - suggesting that Singapore's exports will continue to decline.

HSBC's Robert Prior-Wandesforde said: 'Clearly domestic-related activity has also now succumbed to what is a much bigger and more widespread downturn than we or anyone imagined even a few months ago.

'The good news is that the government is responding reasonably aggressively but sadly it can do little to avoid the recession continuing for a few months yet.'