Manufacturers ended 2016 on a celebratory note, with output expanding at the fastest rate in five years, raising expectations that the growth momentum will continue amid a firmer global outlook.
Economists are now pencilling in more optimistic forecasts for the Singapore economy this year on the back of the latest data, and they also expect last year's growth figures to be revised upwards.
Factory output surged 21.3 per cent last month over the same month a year earlier, double the 10.4 per cent growth tipped by economists, and it was the strongest showing since December 2011.
Manufacturing, which makes up about one-fifth of the economy, has been stuck in a protracted cyclical downturn amid lacklustre global growth.
But the sector - in particular, electronics manufacturing - appears to be staging a gradual recovery, with more upbeat data out in recent months.
If manufacturing does continue on such a healthy growth trajectory in the coming quarters, it will lift the service sector along with it as well - segments such as transportation and warehousing, wholesale trade and financial services.
MR IRVIN SEAH, DBS economist.
December's unexpectedly robust performance was due largely to spikes in both electronic and biomedical output, the two largest components of manufacturing.
Biomed grew 44.9 per cent year on year last month, lifted by pharmaceuticals and medical technology production. If the volatile biomed cluster is excluded, overall manufacturing output still grew a robust 16.1 per cent last month.
Electronics manufacturing drove much of that growth. The cluster, which contributes a third of Singapore's manufacturing output, expanded 49.4 per cent last month over the same month a year ago, due largely to semiconductor production, which surged a whopping 94 per cent.
Other manufacturing clusters, including precision engineering and chemicals, also grew last month, though transport engineering remained weak due to the struggling marine and offshore segment.
Citi economist Kit Wei Zheng said the numbers confirm that Singapore "has not been left out of the global tech restocking cycle that has lifted much of Asia's exports in the fourth quarter".
This implies that fourth-quarter economic growth - and growth for the whole of last year - likely came in stronger than previously estimated, he added.
DBS economist Irvin Seah said that manufacturing has suffered through "a long winter", but prospects are finally looking brighter this year.
He attributed this to three main factors: Stronger consumption growth in the United States driving demand for electronics and biomedical output, a smaller drag from the oil and gas industry as crude prices recover and a more stable economic outlook for China.
"If manufacturing does continue on such a healthy growth trajectory in the coming quarters, it will lift the service sector along with it as well - segments such as transportation and warehousing, wholesale trade and financial services," added Mr Seah, who now expects to revise his growth forecast for this year upwards.
Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye agreed, noting: "Year 2017 will see economic growth recovering after three consecutive years of slowdown.
"A synchronised global recovery appears to be under way. This is a major shift from the unbalanced divergent world over the last few years. Singapore, being a small, open economy, is experiencing a strong cyclical uplift."
Still, Mr Kit warned that the recovery remains fragile. Oil and gas- related transport engineering is still in contraction, while tourism and other domestically oriented sectors such as construction and retail sales also continue to struggle.
"This is on top of the significant downside risks from potential protectionist measures in the US," he noted.