AI demand keeps Singapore manufacturers upbeat for H2

Precision engineering led the outlook, whilst chemicals firms remained cautious.

Singapore manufacturers remained optimistic about business conditions for July to December 2026, supported by global demand for AI-related products, according to the Economic Development Board (EDB).

The sector recorded a net weighted balance of +12%, with a weighted 24% of manufacturers expecting conditions to improve and 12% anticipating a weaker business environment compared with Q2. The remaining 64% expected conditions to remain unchanged.

The reading was lower than the +17% recorded in the previous survey covering the outlook for April to September.

Precision engineering was the most optimistic cluster, recording a net weighted balance of +55%. Semiconductor-related equipment manufacturers cited continued global investment in AI.

Electronics registered a balance of +19%, with semiconductor firms expecting favourable conditions because of demand for chips used in AI applications.

In contrast, chemicals was the most pessimistic cluster at -25%. Petroleum and petrochemical firms expect Middle East feedstock disruptions to keep costs elevated and place pressure on margins.

General manufacturing recorded a balance of -13%, with firms citing higher material, fuel and freight costs.

For Q3, manufacturers reported an overall net weighted output forecast of +26%.

Precision engineering and electronics led output expectations at +55% and +49%, respectively. Demand for AI-related semiconductors, particularly from data centres, was expected to support electronics production.

Chemicals recorded an output balance of -12% because of feedstock shortages and scheduled maintenance shutdowns. General manufacturing posted -27%, with food, beverage and tobacco firms expecting weaker export demand.

Employment is expected to remain broadly stable, with a weighted 74% of manufacturers forecasting little change from Q2. All clusters except transport engineering anticipated a larger workforce.

Meanwhile, a weighted 24% of firms expected difficulties securing export orders. The main concerns were overseas price competition and foreign political or economic conditions, including geopolitical developments and tariffs.

The EDB surveyed 401 manufacturing establishments between June and July, with an 85% response rate. Net weighted balances indicate the direction of expectations and do not represent actual percentage changes in output or employment.