(SINGAPORE) Industrial output has again exceeded expectations - this time, on the up side, though April's strong improvement was exaggerated by a pharmaceutical surge.

After sinking to an all-time low in March, manufacturing output shrank 'only' 0.5 per cent from a year ago in April, the best reading since September 2008. In sequential, adjusted month-on-month terms, April's output grew 24.7 per cent, easily the most robust increase in perhaps a decade.

The overall figure is clearly skewed by the highly volatile pharma segment, which expanded by 78 per cent last month, the Economic Development Board said, due to 'a greater variety of active pharmaceutical ingredients produced and higher production of existing products'. In March, pharma output had fallen 55 per cent.

Output in the other key industries was mostly still down year-on-year last month - electronics production, for example, fell about 24 per cent - but April levels were higher than March's almost across the board, including in some electronic segments.

Excluding the pharma-driven biomedical cluster, industrial output fell 16.4 per cent in April.

Economists are largely agreed that the April surge - particularly as it's pharma-powered - is no conclusive evidence of any firm recovery in demand beyond early encouraging signs of an imminent turnaround. But Macquarie Research's Rajeev Malik expects electronics output to turn up soon, with ongoing improvements in global purchasing managers' index surveys hinting of 'better days ahead for growth'.

He added: 'Consensus expectation for Singapore GDP to decline 7.5 per cent this year appears excessive and will have to be revised, in our view.'

HSBC's economists believe that April's surge in production went towards correcting the gap that had opened up between output and exports in recent months.

'The fact that companies are increasing production to replenish inventories also suggests that they believe that improvements in demand, albeit small, will continue in the period ahead,' says HSBC economist Prakriti Sofat.

But Phillip Securities Research's Joshua Tan remains perturbed by the divergence between two trade measures - non-oil domestic exports (NODX) and non-oil retained imports of intermediate goods (NORI), a coincident indicator of NODX - which signals weak demand ahead.

For the second straight month in April, NORI diverged from NODX, contracting a sharper 5 per cent m-o-m when NODX slipped 1.3 per cent.

'So, chances are NODX are actually under pressure to sideways shuffle at best, which doesn't bode well for industrial output to post another large m-o-m increase,' Mr Tan said. 'If this trend gathers pace, we may have to relook our flat-W (GDP recovery) to an L-shape.'