The Philippine manufacturing sector carried over its good performance into May on the back of solid growth in production and new orders, raising business confidence to a new nine-month high, according to the latest Purchasing Managers Index (PMI) data by S&P Global.
“The Filipino manufacturing sector continued to report further gains mid-way through the second quarter, with growth sustained in new orders and output. Further expansions in business requirements supported a rise in purchasing activity and inventories,” said Maryam Baluch, economist at S&P Global Market Intelligence.
The headline S&P Global Philippines Manufacturing PMI registered at 51.9, above the neutral 50.0 mark but slightly down from 52.2 in April. Still, the headline figure indicated a modest improvement in operating conditions that was broadly in line with the series average.
Sustained total sales growth
The report said May saw sustained growth in total sales although at a slightly slower pace than April. Nonetheless, a further improvement in underlying demand trends and an expanding customer base helped stretch the current run of increase to nine consecutive months.
Manufacturers logged stronger demand from external markets in May, with new export orders rising for the fourth straight month and at a pace that was the most pronounced since December 2016. Growth in new sales from abroad was widely attributed to improved demand trends in key export markets and new client wins, said S&P.
Seeing their sales grow, firms were encouraged to raise their production volumes. Moreover, output expanded at a quicker rate, and one that was the fastest in the year-to-date.
May data also signalled a sixth successive monthly rise in input buying in line with sustained growth in production requirements.
Building inventories
Many companies also sought to build their inventories in order to meet continued growth in output. Moreover, pre-production inventories were accumulated at a pace strongest in 13 months. Stocks of finished goods were also raised in May, though the rate of growth was the weakest in the current three-month sequence of expansion.
Despite growth in production requirements, companies struggled to raise their staffing levels, with job shedding noted for the first time since December 2023. The rate of decrease was the fastest in nine months, with firms largely attributing this to voluntary leavers. However, backlogs continued to fall, indicating that many companies were equipped to handle the sustained rise in demand.
On the price front, companies saw cost burdens fall slightly for the first time since April 2020, but raised their charges more quickly, indicating they are looking to build their profit margins, the report said.
Looking ahead, expectations for the 12-month outlook for output picked up for the first time in five months, with optimism hitting a nine-month high. Firms were hopeful of further improvements in demand conditions and had planned to expand their business operations and introduce new products.
“Subdued inflationary pressures and a further improvement in the demand picture indicate that economic growth will likely be sustained in the coming months,” Baluch said.
