By Justine Irish D. Tabile, Senior Journalist
strong output and new orders, S&P Global said on Wednesday.
The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) rose to 50.9 in June from 50.8 in May, marking the second consecutive month of modest improvement in operating conditions across the country’s manufacturing sector.
A PMI reading above 50 means better working conditions than in the previous month, while a reading below 50 indicates a deterioration.
“Manufacturing conditions in the Philippines continued to improve in June, building on the rebound expected in May as the sector recovered following disruptions related to the Middle East war,” Maryam Baluch, economist at S&P Global Market Intelligence, said in the report.
it also exceeded the Association of Southeast Asian Nations average of 50.5, although the region’s reading was down from 51.5 in May.
The Philippines had the third best PMI reading in June, behind Vietnam’s 51.8 (from 52.8) and Thailand’s 53.6 (from 52.6).
The country was ahead of Malaysia with a PMI of 50.7 (from 49.9), Myanmar with 47.4 (from 49.3) and Indonesia with 46.9 (from 50).
S&P Global said Philippine manufacturers saw output and new orders increase for the second straight month. However, the increase in new orders strengthened slightly, while production growth slowed in June.
“According to anecdotal evidence, where firms reported an increase in production, this was supported by growth in new orders, which in turn was supported by improved demand trends and new customer wins,” he said.
With the increase in new orders, S&P Global said Philippine manufacturers increased purchases of additional raw materials and finished goods for the first time in four months. The increase in purchasing activity was small, but it helped firms maintain their inventories.
Mrs. Baluch also noted the stable employment picture of Philippines in June.
“Manufacturers in the Philippines recorded steady employment levels in June, marking stability compared to the job losses that occurred in April and May,” he said. “Furthermore, signs of renewed pressure on the workforce, as indicated by the new increase in backlogs, raise the prospect of employment in the future.”
S&P Global also noted that there were signs of recovery from supply chain disruptions in June, as firms reported “slight deterioration in retailer performance.”
Ms. Baluch said inflationary pressures began to ease in June after spending rose at the slowest pace in four months. However, sharp increases in costs in April and May continued to weigh on manufacturers’ sentiments.
S&P Global said manufacturers remain optimistic, citing expectations of strong demand, new product launches, and the expansion of new markets.
However, overall business confidence fell to its lowest level since January, Ms. Baluch said it shows that firms are aware of the idea.
John Paolo R. Rivera, senior researcher at the Philippine Institute for Development Studies, said the increase in June reflects strong domestic demand, gradual improvement in supply conditions and sustained business activity despite a challenging external environment.
“If inflation continues to moderate, it should help sustain productivity growth by easing cost pressures and supporting domestic purchasing power. But I expect the increase to remain modest rather than strong,” he said. BusinessWorld.
Inflation eased to 6.8% in May from 7.2% in April, remaining above the central bank’s target of 2-4% but close to its full-year forecast of 6.4%.
The Bangko Sentral ng Pilipinas said June inflation may drop to 6%, predicting that last month’s reading will stabilize within the 6%-7% range.
Mr. Rivera said the outlook for the manufacturing sector will still depend on foreign demand, oil prices, foreign exchange rate movements, financing costs, and the speed of infrastructure implementation.
“Continued development in these areas will provide a solid foundation for production growth in the coming months,” he added.
Federation of Philippine Industries Chairwoman Elizabeth H. Lee said business confidence remains low as firms continue to face global uncertainty, procurement risks and high input costs.
“We have two months of growth, and we are looking forward to a strong positive trend as production volume was also strong with a positive growth of 12% in April,” he added.
However, Mrs. Lee said the recent cost pressure is compounded by tight fiscal conditions following the recent policy rate hike, as well as the recent P85 wage increase for Metro Manila workers.
“The high PMI for June shows that Philippine manufacturing may still grow under pressure. However, sustaining that growth means supporting workers while maintaining the ability of businesses to invest, hire, and compete. We cannot manage one factor in isolation,” he added.
