Singapore’s industrial production experienced a notable slowdown in September, declining by 3.9% month-on-month seasonally adjusted, according to UOB Global Economics and Markets Research. This marks a significant drop from August’s 1.0% decrease, translating to a 3.4% year-on-year increase, which fell short of both Bloomberg’s 7.8% consensus and UOB’s 6.6% forecast.
The primary factor behind this slowdown was a sharp decline in electronics output, which fell by 12.8% month-on-month seasonally adjusted. Semiconductor production also contracted by 13.1% in September, following a 7.9% increase in August. Additionally, the transport engineering sector weakened, with a 6.1% month-on-month decrease, due to reduced shipyard activity and lower production of oil and gas field equipment.
Despite the decline in electronics output, UOB suggests that capacity constraints, rather than a drop in AI-related demand, are to blame. The electronics Purchasing Managers’ Index (PMI) showed strength, with the new export orders subindex rising to 53.1, indicating robust demand. Firms are reportedly drawing down inventories to meet this demand, which could support electronics production momentum in the coming months.
The September industrial production figures imply an 8.5% year-on-year expansion in the manufacturing sector for the third quarter of 2026, surpassing the 7.5% growth suggested by the advance GDP estimate. This could lead to a revision of the final third-quarter GDP growth to 5.6% from the initial 5.4% estimate. UOB anticipates that the Ministry of Trade and Industry will adjust its full-year 2026 GDP growth forecast to around 6%, up from the previous 4.5%-5.5% range.
