Singapore manufacturers stay positive for Q2–Q3 despite sector headwinds

Precision engineering and electronics lead optimism.

The manufacturing sector is expected to remain on a generally positive path in the second and third quarters of 2026, according to the Economic Development Board.

A net weighted balance of 17% of manufacturers expect business conditions to improve between April and September 2026 compared with the first quarter.

Growth is mainly supported by the precision engineering and electronics clusters, which reported net positive outlooks of 51% and 42%, respectively.

These sectors are benefiting from continued demand linked to semiconductor equipment and artificial intelligence-related investments.

At the same time, manufacturers highlighted several risks that may affect performance. These include geopolitical uncertainty, particularly in the Middle East, as well as rising costs for materials and transportation.

Outlook across sectors remains uneven. Precision engineering and electronics show stronger expectations, whilst transport engineering posted a smaller positive outlook of 8%, supported by demand for aerospace maintenance, repair, and overhaul services.

In contrast, other sectors reported weaker sentiment. The biomedical cluster recorded a slightly negative outlook of -2%, whilst general manufacturing stood at -13%. The chemicals sector was the most affected, with a net outlook of -53%, due to supply disruptions and cost pressures.

For the second quarter of 2026, a net weighted balance of 20% of firms expect production to increase. Higher output is anticipated in precision engineering (+50%), electronics (+43%), and transport engineering (+33%). Meanwhile, chemicals (-46%), general manufacturing (-9%), and biomedical (-4%) are expected to see lower production.

Employment levels are projected to remain stable, with 78% of firms indicating no change in headcount. Some sectors plan modest hiring, whilst others remain cautious.

Investment activity continues, with 66% of manufacturers planning to spend on plant and machinery between April 2026 and March 2027. These investments are mainly for equipment replacement, technology upgrades, and capacity expansion.

However, external demand remains a concern. Around 25% of firms expect challenges in securing export orders due to strong competition and global economic uncertainty.

Overall, the sector shows steady but uneven performance, with stronger growth in technology-related industries and weaker conditions in more cost-sensitive segments.