Singapore’s manufacturing sector ended 2025 on a softer note, with factory output expanding at a slower pace than economists had anticipated. While headline growth remained solid on a year-on-year basis, the sharp monthly contraction and the sectoral divergence beneath the surface point to a more uneven recovery as global demand patterns shift. For investors and policymakers alike, the latest data underscores how dependent Singapore’s industrial cycle remains on a narrow set of high-value industries.

Headline Growth Masks a Sudden Loss of Momentum

Manufacturing production in Singapore rose 8.3% year on year in December, a marked deceleration from November’s upwardly revised surge and well below consensus expectations. While the expansion still signals growth, it represents the softest pace since the sector briefly slipped into contraction earlier in the second half of the year.

More striking was the sequential picture. On a month-to-month basis, factory output plunged 13.3%, the steepest decline since the height of the pandemic disruptions in 2020. This back-to-back monthly weakness suggests that momentum heading into 2026 is far less robust than the annual figures alone would imply, especially as global manufacturers confront tighter financial conditions and shifting inventory cycles.

Biomedical Slump Drags on Overall Output

The main drag came from biomedical manufacturing, traditionally one of Singapore’s most volatile but high-impact sectors. Output in this segment collapsed nearly 40% from a year earlier, reversing an exceptional surge seen in November. The downturn was driven almost entirely by pharmaceuticals, where production fell sharply as earlier demand spikes faded.

This volatility highlights a structural issue for Singapore’s industrial profile. Biomedical output can swing dramatically based on production schedules and global healthcare demand, meaning that headline manufacturing figures often exaggerate both strength and weakness. For markets, the concern is less about the one-off decline and more about whether pharmaceutical normalization continues into the first half of 2026.

Electronics Remains a Bright Spot

In contrast, the electronics cluster continued to deliver strong growth, reinforcing its role as the backbone of Singapore’s manufacturing resilience. Electronics output accelerated sharply, led by robust gains in semiconductors as demand linked to artificial intelligence, data centers, and advanced computing remained firm.

Transport engineering and precision engineering also expanded, albeit at a slower and more measured pace. These segments suggest that underlying industrial activity is not collapsing, but rather rotating toward areas aligned with longer-term digital and automation trends. Chemicals, however, slipped back into contraction, reflecting softer regional demand and lingering pressure from global oversupply.

What This Means for 2026

The December data paints a picture of an economy transitioning from broad-based recovery to a more selective growth phase. Singapore’s manufacturing outlook in 2026 is likely to hinge on whether electronics strength can offset normalization elsewhere, particularly in pharmaceuticals. From a policy perspective, the sharp monthly contraction may increase pressure on authorities to support growth if external demand weakens further.

For investors, the message is one of caution rather than alarm. Singapore’s industrial engine is still expanding, but its dependence on a few high-value sectors makes it vulnerable to abrupt swings in global demand and production cycles.