Despite a muted overall performance, Philippine factory growth observed in June has been sustained through July, with manufacturing firms growing more optimistic about consumer demand for their products.

According to the latest data from debt watcher S&P Global released on Friday, Aug. 1, a growth momentum in the manufacturing sector is building up from June through the start of the third quarter at a steady rate.

“While outputs and new orders continued to rise, they did so at modest and historically muted rates,” S&P Global said.

Based on the report, the Philippines’ purchasing managers’ index (PMI)—an overall single-figure indicator of how the manufacturing sector is performing—climbed further to 50.9 from 50.7 previously.

“Despite signaling only a modest improvement in the health of the Filipino manufacturing sector, it pointed to returning growth momentum,” it noted.

S&P Global Market Intelligence economist Maryam Baluch, meanwhile, stressed on the “muted performance” overall, despite the growth uptick the sector has shown upon entering the third quarter of the year.

In terms of employment, manufacturing firms were “cautious“ last month, as reflected in the slower growth in worker absorption. Purchasing also grew at a sluggish rate.

However, Baluch said this cautious environment was balanced out by the subdued risks to inflation.

Alongside this, manufacturing firms have also turned optimistic about their future production levels. This positive sentiment “surged to a four-month high, as firms strategically prepared for anticipated demand.”

“While challenges remain, growing positive sentiment hints at a more hopeful outlook for the sector,” Baluch said.

Meanwhile, factory gate prices dropped for the second-consecutive month in June, due to the “faster decrement” in the annual growth rate for computer, electronic, and optical products manufacturing.

Preliminary data from the Philippine Statistics Authority (PSA) released last Wednesday, July 30, showed that the producer price index (PPI), which reflects the year-on-year increase in prices of manufactured goods, continued dropping in June by 0.45 percent from a year-on-year decline of 0.38 percent in May.

Factory gate prices also declined in June last year, but at a slower rate of 0.2 percent.

In June, the drop in the manufacturing sector’s PPI was driven by the faster decline in PPI for manufacture of computer, electronic, and optical products industry, decreasing by 2.5 percent annually compared to a 2.1-percent drop in May.

During the month, the production of computer, electronic, and optical products accounted for 36.2 percent of the faster drop in the annual PPI growth rate for manufacturing.