ECONOMISTS have yet another reason to be more optimistic that Singapore can emerge out of recession this quarter, thanks to May's upbeat manufacturing numbers.

Manufacturing, which accounts for about a quarter of the economy, rose 2 per cent from a year earlier, said the Economic Development Board on Friday .

This was aided largely by a sharp surge in the drugs cluster, and exceeded the expectations of economists for a 3 per cent decline.

May's rise follows a revised 0.4 per cent gain in April - the first positive headline number since September last year. However, last month's output was down 1.6 per cent over April's after seasonal adjustments.

CIMB-GK economist Song Seng Wun said: 'Singapore will probably be the first Asian country to be technically out of recession, as advance estimates of second quarter GDP will likely show the economy expanding after four consecutive quarters of contraction.'

Standard Chartered Bank economist Alvin Liew said: 'Manufacturing may now even turn positive in the second quarter after contracting 26 per cent year-on-year in the first quarter.'

Last month, other indicators for the local manufacturing sector also showed signs of a turnaround.

According to the latest Purchasing Managers' Index released earlier this month, factory output increased for the first time since August last year due to more orders and higher inventory levels. In May, Singapore exports posted the smallest year-on-year decline since September last year, fuelling stronger belief that the overall economy will achieve growth in the current second quarter over the previous quarter.

On Friday, the key reason for the bright manufacturing data in May came from pharmaceuticals. Last month's overall output would have contracted 17.7 per cent if the biomedical sector had been excluded.

The drugs cluster, accounting for almost a fifth of factory output, soared a whopping 138.6 per cent on higher production of active ingredients and a low output in May last year. This aided a 120.4 per cent rise in the biomedical sector.

However, all other key clusters were in retreat. Electronics slumped 22.3 per cent, while chemicals output dropped 17 per cent last month. Transport engineering shrank 8.1 per cent last month after rising 14.3 per cent the previous month. Precision engineering was down by 23.6 per cent, and general manufacturing shrank 8.8 per cent.