Singapore's private sector continued to expand in September on the back of strong demand, though companies faced mounting pressures from rising costs and deteriorating supplier performance.

The headline seasonally adjusted S&P Global Singapore Purchasing Managers' Index (PMI) fell to 58.1 in September from the record reading of 59.4 in August, according to S&P Global on Monday.

"September's PMI data revealed that demand remained robust, which drove another sharp rise in business activity to round off a positive third quarter for the Singapore economy," said Jingyi Pan, economics associate director at S&P Global Market Intelligence.

Real estate and business services recorded the sharpest rise in both new orders and activity, significantly boosting new work inflows and private-sector hiring. Sentiment for the next 12 months remained positive as survey participants expect market conditions to continue improving.

Despite the strong performance, vendor performance deteriorated in September. Lead times lengthened to the greatest extent since early 2022, S&P Global said. Input prices also grew, burdening firms with higher costs for wages, fuel, materials, and shipping, which aligns with Singapore's inflation rising 2.2% year over year in August.

The sustained PMI expansion tracks with broader economic indicators for the city-state. Singapore's manufacturing output continued to climb in August due to growing demand for artificial intelligence, with factory output jumping 15.4% year over year, accelerating from a 6.9% rise in July, according to Economic Development Board data.

Meanwhile, the country's broader labor market remains tight. The Ministry of Manpower recently reported that the hiring of younger workers helped bring down the jobless rate to 1.9% during the second quarter, beating market estimates of 2.0%