S’pore factory output sees surprise fall in Feb; rising costs, disruption from Iran war darken outlook

SINGAPORE – Singapore’s manufacturing production snapped five months of expansion to dip 0.1 per cent year on year in February, after analysts polled by Bloomberg had forecast 14.1 per cent growth.

The Economic Development Board (EDB), which released the data on March 25, said the decline was “largely due” to factory shutdowns during the Chinese New Year period, which fell in February in 2026 compared with January in 2025.

EDB also revised down January 2026’s output growth to 12.9 per cent from 16.6 per cent.

Analysts said that the economic consequences of the Iran war will be a challenge for Singapore’s manufacturing industry, due to rising costs and supply disruptions.

Firms are already facing the negative impact of higher wholesale electricity prices, transport and logistics expenses, as well as raw material costs, said Maybank economists Chua Hak Bin and Brian Lee.

They expect the fallout from the conflict will likely emerge in the March manufacturing data, which might show factory output stagnating or contracting slightly.

In February, the key electronics industry was the only one that saw a year-on-year growth in output, which rose 13.7 per cent.

Artificial intelligence-related demand drove semiconductor production up 14.6 per cent, while output for infocomms and consumer electronics surged 21.9 per cent. The other electronic modules and components segment also expanded by 40.4 per cent. However, output in the computer peripherals and data storage segment fell 16.3 per cent.

Mr Chua Han Teng, senior economist at DBS Bank, said that AI-related tailwinds and external demand for Singapore-manufactured memory chips and server products should persist in the near term.

But he noted that supplies of critical electronics manufacturing materials could be disrupted by the Middle East conflict. Notably, Iran’s strikes on Qatar’s Ras Laffan natural gas hub have cut off a third of the world’s supply of helium, essential across multiple steps of semiconductor manufacturing.

Mr Alvin Liew, senior economist and senior vice-president of global economics and markets research at UOB, said the Middle East conflict, if it persists, could lead to a decline in consumption and investment activity for Singapore’s key trading partners. This would result in weaker demand for Singapore’s exports.

Biomedical manufacturing took the biggest hit in February, tumbling 27.3 per cent year on year. Excluding this volatile cluster, however, factory output expanded 3.9 per cent, though this is sharply lower than January’s downwardly revised 19.9 per cent increase.

Within the biomedical industry, pharmaceutical output fell 18 per cent due to production of a different mix of active ingredients, while softer demand for medical devices led to a 30.4 per cent drop in medical technology output.

The precision engineering industry saw a 3.5 per cent drop in production due to factory shutdowns during the festive period. Output from the machinery and systems segment fell 3.4 per cent, while output from the precision modules and components segment also declined 3.8 per cent.

The chemicals industry recorded a 4.6 per cent drop in output due to weaker demand and plant shutdowns. Petroleum and petrochemicals output fell 3.9 per cent and 7.4 per cent respectively, while the specialities segment also contracted 10.2 per cent.

Mr Chua said the petrochemicals segment is already feeling the pressures of production challenges and disruptions stemming from a supply crunch of naphtha feedstock, which is a core material of plastics manufacturing and derived from crude oil distillation.

Global crude oil supplies have been affected by the Iranian blockade in the Strait of Hormuz, which is a major channel for oil tankers.

Rising plastic prices could also impact production costs for other industries, said the Maybank economists.

The transport engineering segment recorded the lowest decline in output at 0.2 per cent, helped by increased activity in shipyards, which led to a 7.1 per cent growth in the marine and offshore engineering segment. Festive shutdowns led to contractions of 1.7 per cent in the aerospace segment and 15.9 per cent in the land segment.

Factory output in the general manufacturing industry fell 5.7 per cent, with lower output of dairy and cocoa products leading to a 4.6 per cent decline in the food, beverages and tobacco segment.

The printing segment contracted 1.3 per cent, while lower production of structural metal products and furniture led to an 8.7 per cent drop in output from the miscellaneous segment.