The big boost, breaking four consecutive months of decline, came almost entirely from the volatile biomedical sector, with drug production providing the rush.

One economist even reckoned anti-impotence pill Viagra had a big role in improved manufacturing performance.

GK Goh economist Song Seng Wun said increased pharmaceutical output was likely to have been caused by American drug giant Pfizer starting up a plant here to make the main ingredient of the top-selling pill.

That aside, things aren't nearly so rosy, said economists.

IDEAglobal's Nizam Idris said: "Strip out the biomedical sector and output actually shrank by 5.5 per cent.''

Economists were confident the economy was on the mend, but said the recovery was likely to be muted despite the numbers released yesterday by the Economic Development Board.

Indeed, Deputy Prime Minister Lee Hsien Loong yesterday said Singapore was maintaining its official gross domestic product growth forecast.

"I think things are picking up, but for Singapore we have not revised our forecast. It's still nought to 1 per cent,'' he said.

Still, August's upbeat figures bring some cheer after a second quarter in which Sars led to the worst quarterly economic performance ever.

Biomedical companies' production zoomed up 68.5 per cent, boosted by pharmaceuticals which saw a 78.4 per cent jump.

The all-important electronics sector, which accounts for about a third of Singapore's factory output, registered its second month of expansion after four months of contraction. It grew 1.9 per cent after rising 0.6 per cent in July.

Although semiconductor and disk drive production output rose 19.3 per cent and 30.8 per cent respectively, this was dragged down by other segments of the sector.

UOB economist Low Ping Yee said: "Continued improvement in the electronics sector, led by semiconductors, is more or less in line with expectations. The recovery trend remains intact.''