Singapore factory activity edges up in December, supported by electronics demand

SINGAPORE – Singapore’s manufacturing output edged up in December, pointing to a positive outlook for the sector going into 2026.

This also marks the fifth consecutive month of expansion for the overall manufacturing sector, according to data released on Jan 2 by the Singapore Institute of Purchasing and Materials Management (SIPMM), which compiles the monthly survey.

The December reading of the Singapore Purchasing Managers’ Index (PMI) came in at 50.3, up 0.1 point from

the previous month

, indicating a slightly faster pace of expansion.

The index is a barometer of the overall manufacturing industry’s health. A PMI reading above 50 indicates growth; one below suggests a contraction in output.

Singapore’s strong PMI readings follow the trend in the region, as key economies expanded factory activity in December.

Taiwan and South Korea led a rebound in Asia’s manufacturing activity, with firms heading into 2026 with optimism that global demand is weathering US President Donald Trump’s war on free trade, Reuters and Bloomberg reported.

China’s data readings also showed an unexpected turnaround in factory activity in the world’s second-largest economy, helped by a pre-holiday surge in orders, they noted.

Singapore’s latest performance was driven by stronger growth in new orders and factory output, said SIPMM.

However, slower rates of expansion were recorded for the indexes of new exports and input purchases. Meanwhile, the employment index still contracted, although at a slower rate.

Slower expansion rates were also recorded for the indexes of finished goods, imports and input prices, while the order backlog index posted a faster rate of contraction.

The future business index remained in expansion for the second consecutive month.

Mr Stephen Poh, SIPMM’s executive director, said the positive outlook for the manufacturing sector is supported by continued demand, particularly in the electronics and semiconductor segment.

“However, manufacturers are facing capacity constraints, as well as disruptions from Red Sea diversions, which have led to longer transit times, higher logistics costs, and delays in supplier deliveries,” he said.

December’s positive reading was supported by the electronics sector, which accounts for about 40 per cent of manufacturing output.

The PMI for the electronics sector increased by 0.3 point to 50.9, signalling a stronger pace of expansion and marking the seventh consecutive month of expansion for the sector.

DBS Bank senior economist Chua Han Teng noted that the electronics PMI has returned to the level it was at before the Liberation Day-induced plunge, referring to the broad package of tariffs that President Trump announced on April 2, 2025.

This rise was supported by faster expansion in the indexes of new orders, new exports, factory output and employment, SIPMM noted.

The employment index for the sector also recorded its fourth consecutive month of expansion.

However, the supplier deliveries index recorded its second month of contraction, suggesting longer delivery times.

Meanwhile, faster expansion rates were recorded for the indexes of imports, input prices, order backlog and future business, while the finished goods index posted a slower expansion rate.

The future business index recorded its sixth consecutive month of expansion.

Mr Chua noted that the positive momentum for electronics manufacturing continues to reflect the combination of strong near-term demand for artificial intelligence (AI)-related servers and server-related products, as well as US tariff exemptions on electronic goods.

However, in 2026, Singapore will have to contend with the lingering threats of US semiconductor tariffs, as well as the possibility of a moderation in exceptional AI-related demand, he said.

He added that while headline PMI went up in December, not all sub-indexes showed improvements, which could potentially signal an impending moderation for non-electronics manufacturing, as the lagging impact of higher US tariffs globally begins to bite.

OCBC Bank’s chief economist Selena Ling also noted that the momentum for the overall manufacturing sector may be starting to lag behind the electronics industry’s.

“Notably, the stock of input purchases and stocks of finished goods softened in December compared with November readings. This could imply that the growth momentum may have peaked in the fourth quarter of 2025 and could ease slightly into the first quarter of 2026,” she said.

“In particular, the capacity constraints, longer transit times and higher logistics costs and delays in supplier deliveries cited by manufacturers suggest that this is due to supply-side restrictions rather than a dampening of demand conditions per se.”

But she said the outlook also critically depends on whether pharmaceutical and semiconductor momentum sustains into the first quarter of 2026.

“The global semiconductor market is still forecast to expand in 2026 due to strong demand for AI-related chips and should be primarily led by AI and data centre infrastructure builds amid a healthy capex (capital expenditure) cycle. The global pharmaceutical industry is also tipped to be broadly resilient in 2026, with key late-stage drug launches scheduled,” she said.

Singapore’s manufacturing surge in the final quarter of 2025, driven by demand for AI-related semiconductors and pharmaceuticals, helped the economy achieve better than expected full-year growth of 4.8 per cent.

The economy grew 5.7 per cent year on year in the fourth quarter of 2025, up sharply from the 4.3 per cent expansion in the third quarter, according to advance estimates from the Ministry of Trade and Industry on Jan 2.