Last December proved another positive month for the private sector, with overall business and operating conditions holding up.

The Nikkei purchasing managers' index (PMI), which is a proxy for business activity, inched down from 52.2 in November to 52.1 last month. A reading of above 50 signals expansion.

Output growth was sustained and still noticeable, despite the slight decline since November.

An official PMI representing only factory activity, out on Monday, indicated a sixth consecutive month of contraction in the manufacturing industry, with a reading of 49.5 for last month, from November's 49.2 reading.

The Nikkei Singapore PMI is derived from a survey by Nikkei and Markit Economics. Data is compiled from monthly questionnaires sent to executives in over 400 private sector firms that represent the structure of Singapore's economy, including manufacturing, services, construction and retail.

The report said: "The health of the economy has now strengthened in each of the past seven months, though the rate of improvement remained moderate overall."

It found that foreign client demand softened last month owing to new export-order growth slowing to a modest rate since November.

Costs for firms also rose at the quickest rate in 11 months, said to have been driven by faster increases in both purchasing prices and staffing costs. "Companies only passed on part of their higher cost burdens, however, and raised their selling prices marginally," said the survey.

Economist Annabel Fiddes at Markit said: "Firms took a cautious approach to employment and purchasing activity, with staff numbers little changed in December and input buying rising only slightly."

She said this suggests that growth projections for the start of this year remain muted, as companies wait for a "much- needed pick-up in client demand".