Manufacturing activity in the Philippines strengthened sharply in August, with production expanding at its fastest pace in more than nine and a half years as stronger demand pushed factories to increase hiring and purchases, according to the latest S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI).

The headline PMI rose to 54.9 in August from 51.8 in July, marking the fourth consecutive month of improvement and the strongest overall expansion in the sector since December 2016, S&P Global said. A reading above 50 indicates expansion, while a reading below 50 signals contraction.

Substantial rise in output

The survey showed that output rose substantially as new orders increased at their fastest pace in six months, supported by new product and model launches, repeat business and a broader customer base. New export orders also increased for the first time in six months, providing a modest lift to overall demand.

“The Filipino manufacturing sector continued to build momentum in August, moving on from the flat performance seen in the previous quarter, when activity was affected by the conflict in the Middle East,” said Maryam Baluch, economist at S&P Global Market Intelligence.

“Firms responded by increasing both purchasing and hiring to keep up with greater production needs,” Baluch added.

Manufacturers responded to stronger demand by increasing purchases and hiring. Input purchasing reached a six-month high, while employment rose after five consecutive months of declines. Although job creation remained modest, the pace was the strongest in 21 months.

Companies also accumulated stocks of purchases for the first time since February, although finished-goods inventories declined for a second straight month as supplier delays prompted some manufacturers to draw down existing stocks.