Domestic exports hit fastest pace since 2010 as AI demand lifts electronics and trade

The economy expanded 5.9% YoY in the second quarter.

Singapore's non-oil domestic exports grew 27.4% year-on-year in the second quarter of 2026, accelerating sharply from 9.6% in the first and reaching the fastest first-half pace since 2010, according to a McKinsey report.

Total merchandise trade growth hit 40.2% in the second quarter, up from 25.6% in the first, with all trade segments recording growth above 20%. Electronics led the expansion, with output rising 33.8%, driven by strong global demand for integrated circuits and disk media products tied to AI investment. Non-electronics exports also gained momentum, led by specialised machinery and pharmaceuticals.

Manufacturing accelerated to 12.5% growth from 7.3% in the previous quarter on the back of AI-related electronics and precision engineering demand. The PMI rose to 59.2 in July from 57.9 in April, signalling sustained momentum in private sector activity.

The strength was not uniform. Chemicals output continued to contract amidst supply-chain disruptions, and biomedical manufacturing fell 17.3% on softer global demand. Food and beverage services was the only services segment to contract, with overall services growth moderating to 4.9% from 6.3%.

The Monetary Authority of Singapore tightened monetary policy twice in the first half of the year, in April and July, its first tightening moves since 2022, as energy costs from the Middle East conflict fed into import prices. Inflation rose to 1.8% in the second quarter from 1.5% in the first.

Retrenchments rose to 4,500 in the second quarter from 3,830 in the first, the highest level since 2020, driven mainly by business restructuring in the services sector. McKinsey said hiring is expected to remain cautious as AI continues to reshape the labour market, though demand for skilled technology and engineering roles remains strong.

McKinsey said the outlook remains subject to uncertainty from geopolitical developments and the durability of the global AI investment cycle.

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