Private-sector companies recorded more orders and new business last month, but in a sign of the cautionary mood they coped by hiring more part-timers, according to the Nikkei Singapore Purchasing Managers Index (PMI) yesterday.
The level of hiring was a record for the monthly survey, which began in August 2012.
Companies also raised prices at a survey record rate as they sought to offset rising costs, said IHS Markit, which compiles the index. This could raise inflationary pressures in the coming months, it added.
The headline PMI figure slowed from 52.8 in November to 52 last month, but still signalled a further improvement in business conditions as a reading above 50 points to growth.
Though only moderate overall, the latest reading remained above the 2016 average, IHS Markit noted.
Greater client demand continued to drive new work volumes as reflected in another increase in new orders.
Also, growth in new business from overseas accelerated from November, driven by improving international demand, said IHS Markit.
Facing rising inflows of new business, capacity pressures continued to build at Singapore private-sector firms, with backlogs increasing for the 13th month during December, it added.
IHS Markit economist Bernard Aw said: "Singapore's private sector continued to signal improving business conditions at the end of 2016, as companies reported expansions in both output and new orders.
"Furthermore, signs of rising external demand saw foreign appetite for Singaporean goods and services increase further in December. At the same time, pre-production stocks were depleted at a strong rate as demand outstripped supply, based on anecdotal evidence.
"The rate of job creation also accelerated to a survey high, though increased employment of part-time staff remained the key reason for stronger job growth."
Mr Aw said business conditions could strengthen further this year if the trend of improving global demand is sustained.
On Tuesday, a wider PMI index showed factory activity here rising for the fourth month in December, lifting hopes of a manufacturing rebound after more than a year of contraction.
The PMI compiled by the Singapore Institute of Purchasing and Materials Management posted a reading of 50.6 last month - the highest in two years, up from November's 50.2 reading.