PH manufacturing dips on soft June business mood

PH manufacturing dips on soft June business mood
  • Philippine manufacturing saw production and factory orders easing in June 2023, reflecting moderate growth in the overall business conditions during the period
  • The Philippines Purchasing Managers’ Index declined to 50.9 in June from 52.2 in May, signaling the weakest improvement in business conditions since July 2022
  • Additional demand and new customers drove up new orders while foreign demand for Filipino manufacturers’ goods also expanded in June
  • Longer input delivery times were noted during the period but delay was only fractional overall

Philippine manufacturing dipped in June, as growth in production and factory orders eased during the period.

The country’s Purchasing Managers’ Index (PMI) – a composite single-figure indicator of manufacturing performance – dipped to 50.9 in June from 52.2 in May, signaling the weakest improvement in business conditions since July 2022.

Still, the latest headline figure stayed above the no-change 50.0 mark for the 17th successive month, according to the latest survey by New York-based financial and information analytics firm S&P Global.

“The muted headline figure reflected softer rates of expansion across both output and new orders, while manufacturing employment registered a fresh reduction,” said Maryam Baluch, economist at S&P Global.

Output levels rose further in June but the pace of growth lost momentum, indicating only a fractional rise in manufacturing output. The pace of the upturn was also the weakest since the current run of expansion began in September 2022.

Though modest overall, new orders received by goods producers across the Philippines also rose at a softer pace in June. That said, firms highlighted that additional demand and new client wins drove the expansion. Similarly, while helping to sustain growth in total factory orders, foreign demand for Filipino manufacturers goods also expanded in June.

S&P Global said the continued expansion in order book volumes encouraged manufacturing firms to raise their buying activity for the 10th successive month in June. Moreover, the rate at which input purchasing grew was the quickest seen in four months.

A slower rise in output, however, led to a fresh contraction in workforce numbers, following a period of job creation in May.

According to surveyed businesses, the renewed reduction in manufacturing employment was in part due to non-replacement of voluntary leavers, as well as some firms actively reducing payroll numbers.

Despite a contraction in workforce, manufacturing firms across the Philippines registered no change in the level of unfinished work in June. Where an increase in backlogs of work was noted, some firms attributed this to growth in new orders and delayed delivery of inputs, while others said fewer sales allowed firms to deplete work-in-hand.

After an improvement in vendor performance in May for the first time since July 2019, S&P Global said June data indicated a renewed lengthening of delivery times for inputs. The degree to which supplier performance deteriorated, however, was only fractional overall.

Price pressures dwindled in the latest survey period, as the rate of input price inflation slowed notably to the weakest recorded since October 2020. In turn, firms raised their average selling prices at the softest pace in just over two-and-a-half years.

According to the survey, manufacturing companies across the Philippines maintained an optimistic outlook towards output in the next 12 months. Confidence in an increase in production stemmed from expectations of greater new sales in the coming year. That said, despite rising to a five-month high, the level of positive sentiment was weaker than the survey series trend.

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