Local manufacturers signalled a rebound in operating conditions at the end of the second quarter following two consecutive months of contraction, the latest IHS Markit survey showed.

IHS Markit Philippines Manufacturing Purchasing Managers’ Index (PMI) has slightly rose from 49.9 in May to 50.8 last month, above the 50 no-change threshold that separates expansion from contraction.

In a statement released by IHS Markit on Thursday, July 1, the UK-based information analytics firm said the uptick was led by softer declines in output, new orders, and employment, as a well as a renewed expansion in pre-production inventories.

On the price front, IHS Market said input costs rose with material shortages reportedly the main driver of inflation. However, the rate of increase in June eased to a three-month low.

“Nevertheless, firms sought to pass on part of the burden by raising their selling prices, and did so at the quickest rate in over two-and-a-half years,” IHS Markit said.

However, production levels in June declined for the third month in a row, but at a much slower pace. IHS Markit said the reduction was often linked to COVID-19 and subdued domestic demand.

Moreover, new orders fell, although the rate of decline was only slight and the softest in the current three-month sequence of decline, IHS Markit said.

“MECQ measures enforced in key regions led to weak domestic demand,” IHS Markit said.

“In contrast, international demand for Filipino manufactured goods rose for the second successive month, and with a rate of growth that was stronger than the historical average,” it added.

With declines in output and new orders persisting in June, IHS Markit said manufacturers remained cautious about adding to their staffing levels.

Workforce numbers have now fallen in each month since March last year, though the latest decline was the softest in three months.

Cost saving efforts and voluntary resignations were also cited by respondents as driving the fall in workforce numbers, IHS Markit said.

Looking ahead, IHS Markit said goods producers in the Philippines remained optimistic about their overall prospects for higher production levels in the next 12-months.

“Sentiment reached a three-month high with hopes of greater demand often fuelling stronger expectations. However, the degree of optimism posted below the long-run trend level with some manufacturers commenting on concerns over the longer-term impact of the pandemic,” it said.