Local factories humming better in June

Factories all over the country expanded their productive activities last June amid stronger output and new orders, S&P Global said last week.

S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) inched up to 50.9 in June from 50.8 in May, signaling a second consecutive month of modest improvement in operating conditions across the country’s goods-producing sector.

A PMI reading above 50 denotes better operating conditions than in the preceding month, while a reading below 50 shows deterioration.

“Manufacturing conditions in the Philippines continued to improve in June, building on the tentative recovery observed in May as the sector regained footing following disruptions linked to the war in the Middle East,” Maryam Baluch, an economist at S&P Global Market Intelligence, said in the report.

The Philippines’ June PMI also exceeded the Association of Southeast Asian Nations’ average of 50.5, although the regional reading eased from 51.5 in May. 

The Philippines had the third best PMI reading in June, after Vietnam’s 51.8 (from 52.8) and Thailand’s 53.6 (from 52.6).

The country was ahead of Malaysia which had 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 grow for a second straight month. However, the increase in new orders strengthened slightly, while production growth eased in June.

“According to anecdotal evidence, where firms reported a rise in output, this was supported by growth in new orders, which in turn was underpinned by improved underlying demand trends and new client wins,” it said.

With the rise in new orders, S&P Global said Philippine manufacturers boosted purchases of additional raw materials and semi-finished items for the first time in four months. The increase in purchasing activity was marginal, but helped firms maintain their inventory of inputs.

Baluch also noted a more stable employment picture in the Philippines in June.

“Filipino manufacturers recorded unchanged staffing levels in June, marking a stabilization compared with job shedding seen in April and May,” she said. “Moreover, signs of renewed pressure on capacity, as indicated by a fresh rise in backlogs, suggests potential for future recruitment.”

S&P Global stressed there were signs of recovery in supply-chain disruption in June, as firms reported a “modest deterioration in vendor performance.”

Baluch said inflationary pressures started to ease in June after cost burdens increased at the weakest pace in four months. However, sharp increases in costs in April and May continued to weigh on manufacturers’ sentiment.

S&P Global said manufacturers remained optimistic, citing expectations of stronger demand, new product launches, and expansion into new markets.

However, overall business confidence fell to its lowest level since January, a clear indication that the players in the manufacturing sectors are still cautious about the outlook.