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Singapore’s industrial production unexpectedly surged the most in 16 months in July as pharmaceuticals output jumped and the electronics slump eased, heralding a sustained economic recovery.

Manufacturing, which accounts for about a quarter of Singapore’s economy, rose 12.4 percent from a year earlier following a revised 9 percent decline in June, the Economic Development Board said today. The median forecast in a Bloomberg survey of nine economists was for a 1 percent drop.

“It looks increasingly likely that the electronics cycle is finally turning,” said Robert Prior-Wandesforde, an economist at HSBC Holdings Plc in Singapore. “This doesn’t just bode well for Singapore but most of the region where the tech sector is an important driver of growth.”

Singapore raised its 2009 forecast for exports this month, predicting overseas shipments may drop a less-than-expected 10 percent to 12 percent as global demand improves. The Southeast Asian economy’s recovery is likely to continue into 2010 after a “powerful” expansion this quarter, said Prior-Wandesforde.

Asia’s export-dependent economies including Taiwan and Malaysia have reported smaller declines in overseas sales as about $2 trillion in pledged government stimulus and record-low interest rates helps the world recover from its slump.

South Korea’s manufacturers increased production at the fastest pace in four months in June, and Malaysia’s industrial output fell the least in seven months.

Cascade Down

“The positive effects of the recovery in the global economy should cascade down to the exports-oriented manufacturing sector fairly quickly,” said Irvin Seah, an economist at DBS Bank Ltd. in Singapore. “Continued improvement in this sector is expected in the coming months, although downside risks remain in the sustainability of the current surge in the pharmaceutical industry.”

Industrial production rose a seasonally adjusted 23 percent in July from the previous month, when it slid a revised 9 percent.

Singapore’s purchasing managers’ index showed manufacturing expanded for a third straight month in July. Export orders and output gained last month, including those for electronics, according to an Aug. 4 report by the Singapore Institute of Purchasing & Materials Management.

Singapore raised its 2009 economic forecast July 14, after the manufacturing industry posted its best performance in five quarters in the three months to June. The island’s economy has stabilized after an unprecedented “storm” earlier in the year, Prime Minister Lee Hsien Loong said this month.

Electronics Output

Electronics production fell 5.6 percent from a year earlier last month, following a revised 19.2 percent decline in June. Electronics make up about 26 percent of total manufacturing output, and shipments of such products have dropped every month for more than two years.

Pharmaceutical production, which accounts for about 20 percent of manufacturing, surged 139.2 percent after gaining a revised 12 percent in the previous month. Excluding biomedical manufacturing, production contracted 7.4 percent in July, after shrinking a revised 13.8 percent in June.

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