Local factory activity showed a strong recovery in July, bouncing back from the previous month's near-year-low, driven by improved demand, the S&P Global reported.

The Philippines’ S&P Global Manufacturing Purchasing Managers' Index (PMI)—a comprehensive gauge of the industry’s performance—bounced back from its 11-month low of 50.9 in June to reach 51.9 last month.

S&P Global said the increase indicates a modest recovery in operating conditions for the domestic manufacturing sector.

The positive shift in July's PMI was driven by several factors. Firstly, both factory orders and manufacturing production experienced faster expansions, contributing to the overall improvement.

Additionally, export sales showed significant growth due to increased demand from foreign clients.

As a result of these positive developments, S&P Global said companies in the Philippines responded by raising their buying activity.

This aligns with the need to meet the growing production requirements brought about by the improved operating conditions and increased export sales.

On the other hand, S&P Global observed that manufacturing employment in the Philippines experienced a marginal reduction for the second consecutive month. While the decrease was relatively small, it indicates a continued trend of job cuts within the sector.

Furthermore, S&P Global reported a slight strengthening of inflationary pressures in July, although they remained historically subdued.

Maryam Baluch, S&P Global Market Intelligence economist, said the latest PMI reading for the domestic manufacturing sector signaled a stronger improvement in operating conditions at the start of the third quarter.

Baluch said the continued improvement in the underlying demand picture helped drive the latest upturn, with both production and new orders recording stronger rates of expansion.

“Though July data reported a slight intensification of price pressures, rates of both input price and output charge inflation have eased considerably from the highs seen over the last three years,” Baluch said.

“The latest data adds to our current forecast that the central bank will abstain from further tightening its monetary policy in the near term,” she added.