The country's manufacturing firms have reported an improvement in operating conditions at 52.9 in September, up from 51.2 in August, data from S&P Global Manufacturing Producers Manufacturers' Index showed on Monday.

Data from S&P also showed that greater client appetite meant that output and new orders returned to growth, while companies added to their payroll numbers for the fifth month running.

The seasonally-adjusted headline figure posted above the neutral 50.0 threshold for the eighth month running, indicating a further improvement in conditions in the Philippine manufacturing sector.

Overall, the rate of growth in the sector may have been modest overall, but it was the fastest in three months and was quicker than the series average (51.8).

"Growth across the Filipino manufacturing sector quickened in September, according to the latest PMI data. Firms noted that an increase in customer demand allowed production levels and factory orders to grow for the first time since June," Maryam Baluch, economist at S&P Global Market Intelligence, said:

Moreover, sentiment across manufacturing firms reached the strongest in just over four years.

At the same time, upward pressure on prices eased during the latest survey period, as rates of both input cost and output price inflation soften on the month.

"Adding to the good news is that inflationary pressures, which have been uncomfortably high in the past couple of months, moderated in the latest survey period, hinting that inflation may have peaked," Baluch added.

The two largest sub-components of the PMI (output and new orders), rose during the latest survey period. The rate of increase was only moderate but nevertheless a welcome change from the preceding two survey periods.

According to anecdotal evidence, greater client appetite helped boost factory orders, with firms then scaling up production.

"Though Filipino manufacturers saw inflows of new business increase during September, foreign demand for Filipino manufactured goods weakened, thereby extending the current run of contraction to seven months, and suggesting that growth was primarily driven by domestic demand," S&P Global said.

In line with greater output, firms purchased additional inputs for use in the production process. The respective seasonally adjusted index registered above the 50.0 no-change mark after signaling a contraction in the previous survey period.

Moreover, firms expanded their workforce numbers at the second-fastest rate in the current five-month sequence of increases.

Turning to prices, inflationary pressures eased during September. The rate of input price inflation eased to a 20-month low and charges levied increased at a softer rate than that seen in August.

That said, the pace of inflation rate was still historically elevated with firms choosing to pass costs on to customers.

"That said, inflation rates remained sharp and could still be harmful to demand conditions, with firms citing rising material and energy prices, alongside an unfavorable exchange rate, which could put upward pressure on costs. Moreover, widespread supply-chain issues continue to hamper production," Baluch added.

Though disturbances in supply chains hindered production, an improvement in demand conditions helped keep expectations upbeat in September.

Moreover, the 12-month outlook for the output was strongly positive, and the degree of optimism highest since August 2018.

"Overall, sustained growth across the sector has meant that firms are largely optimistic with regards to expansion in output in the future," the economist said.