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March industrial output in Singapore fell less than expected indicating that the rebound in the Singapore economy may already be underway.

Analysts had forecast a year-over-year drop because of difficult comparables from a year before; however, the month-over-month increase in output negated the possibility of a contraction.

This is fantastic news for the city-state's economy, as structural headwinds were set to pose problems.

The Singapore Dollar reached a six-month high this week against the US Dollar as the result of dovish sentiment from the U.S. Federal Reserve. Prior to the release of manufacturing data, there were concerns that the strength in the SGD would deter exports.

Compounding the problem, inflation accelerated to 5.2% for the month of March, much higher than expectations. Had output contracted more than expected for March, Singapore would be in a bind, as it would have to either sacrifice growth or currency stability.

The better-than-expected manufacturing numbers now allow the central bank more freedom to operate, as they can now afford to raise rates to better combat inflation without worrying about stalling growth thanks to the recent resilience of Singapore's economy.

The iShares MSCI Singapore Index ETF ( EWS , quote ) traded about 1% higher Thursday on the data.

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