Singapore’s manufacturing output rose 12.6% in December from a year earlier, topping expectations and suggesting the trade-dependent economy is showing resilience in the face of Europe’s sovereign debt crisis. 



The rise was driven by a surge in production in the pharmaceutical industry and reversed a revised 8.0% drop in November, the Economic Development Board said. The increase beat all estimates in a poll of 12 economists by Dow Jones Newswires, which pointed to a median 7.3% rise.



”Economic growth seems to be doing all right and the shock waves from Europe have not been as severe as the Monetary Authority of Singapore (MAS) had initially estimated. For now, we think that the MAS will focus on taming inflation,” said Wai Ho Leong, an economist at Barclays Capital. 



Compared with the previous month, production expanded a seasonally adjusted 7.8%, after falling a revised 24.5% in November. The median forecast of eight economists in the same poll was for a 3.0% expansion.



The data vindicate the central bank’s decision in October to loosen monetary policy only marginally to help Singapore’s economy tide over the crisis in Europe, its biggest trading partner. The need to temper inflation while making sure that industries dependent on exports keep humming will complicate the MAS’s job when it reviews its monetary policy in April.



Data released on 25 January showed inflation eased to 5.5% in December from 5.7% in November, but that was likely still above the central bank’s comfort zone. 



The solid manufacturing data may lead to a stronger reading on gross domestic product (GDP). Preliminary data showed GDP shrank 4.9% on quarter in seasonally adjusted and annualized terms in October-to-December. That number may be revised upward when the government reports revised GDP data next month, taking into account the manufacturing output, said Credit Suisse economist Wu Kun Lung.



Output in the biomedical sector, which accounts for 19.6% of total manufacturing production, more than doubled in December from a year earlier, while output in the highly volatile pharmaceuticals sector rose even faster at 121.6% after expanding just 4.9% in November. 



Singapore’s pharmaceutical sector is dominated by a small number of firms, and output can drop significantly when plants change product lines or close for maintenance. Conversely, output can rise dramatically if a batch of high-value drugs is produced.



Excluding the biomedical sector, manufacturing output contracted 9.0% on year in December, after a 13.5% decline in November. Excluding biomedical manufacturing, output rose 6.7% on month in seasonally adjusted terms in December.



Electronics output, which accounts for almost a third of Singapore’s factory production, fell 22.8% on year, compared with November’s 30.6% on-year decline. 

For the whole of 2011, manufacturing output rose 7.6%.