Manufacturing activities in the Philippines remained robust, albeit the growth in factory output eased slightly in May.
The S&P Global Philippines Manufacturing PMI (purchasing managers’ index) hit 54.1 in May, down from 54.3 in April.
The latest monthly report from S&P Global showed that both factory output and new orders grew at “solid rates” despite easing from recent highs experienced in April.
A reading above 50 indicates an expansion, and below 50 a contraction. May recorded the fourth month of a score above 50.
Despite the modest change, the research firm said sustained growth across the Philippine manufacturing sector resulted in the first increase in workforce numbers since February 2020.
“As pandemic restrictions ease, strong demand conditions resulted in firms increasing hiring activity for the first time since early-2020,” said Maryam Baluch, economist at S&P Global Market Intelligence.
“At the same time, companies continued to accumulate stocks in anticipation of greater demand in the coming months,” Baluch said.
Downside risks
She added that business confidence remained strongly optimistic, with firms hopeful of greater output in the coming 12 months.
“However, the downside risks to the sector come in the form of persistent inflationary pressures and supply chain disruptions which have been further exacerbated by the war in Ukraine and China’s zero-COVID policy,” Baluch added.
The index is based on a monthly survey of about 400 manufacturers, with responses related to changes compared to the previous month collected in the second half of each period.
S&P Global said that in the May survey, respondents remained keen to build stocks as they anticipated higher sales in the coming months.
Thus, holdings of raw materials and semifinished items rose for the ninth month running while postproduction inventories grew at the strongest rate since December 2016.
Businesses remain upbeat
However, data from May also signaled a further deterioration in vendor performance, as lead times lengthened to a greater extent compared to April.
Further, the global uncertainty stemming from the Russian invasion of Ukraine and the stringent COVID-19 lockdowns in China continued to weigh on output expectations for manufacturing firms in the Philippines.
Still, business confidence remained upbeat amid hopes of a further expansion in production and greater client demand in the next 12 months.