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The Philippine manufacturing sector expanded for the 16th consecutive month in May, posting above the average recorded over the series history and indicating a solid upturn
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Both new orders and production expanded at quicker rates
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The Philippines Purchasing Managers’ Index (PMI) increased to 52.2 in May from an eight-month low of 51.4 in April
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Demand from foreign markets also fared well in the latest survey period, with export volumes growing solidly, albeit at a slightly softer pace compared to April
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Filipino manufacturing firms also reported improvements in supply chains, which resulted in shorter delivery times for inputs in May
The Philippine manufacturing sector expanded for the 16th consecutive month in May, posting above the average recorded over the series history and indicating a solid upturn.
Both new orders and production expanded at quicker rates bringing the Philippines Purchasing Managers’ Index (PMI)—a composite single-figure indicator of manufacturing performance—to 52.2 in May from an eight-month low of 51.4 in April, signaling a quicker improvement in operating performance, according to the latest survey of S&P Global. The latest headline figure was also above the 50.0 neutral threshold.
The improvement in the health of the Filipino manufacturing sector during May was driven by quicker expansions in both factory orders and manufacturing output, which have now risen each month since September 2022.
According to anecdotal evidence, the upturn in new orders stemmed from stronger demand conditions and the acquisition of new clients.
Demand from foreign markets also fared well in the latest survey period, with export volumes growing solidly, albeit at a slightly softer pace compared to April.
The sustained uptick in new orders resulted in a turnaround in manufacturing employment. Businesses expanded their hiring activity for the first time in four months, and at the strongest pace since October last year.
Buying activity also increased, and for the ninth straight month during May, with the rate of growth broadly in line with that seen in April.
Firms purchased additional inputs to meet growing demand. Moreover, in anticipation of future demand, manufacturing firms were keen to raise their inventory levels. Stocks of pre-production items rose further, thereby extending the current sequence of growth seen since September 2021, while manufacturers also raised their holdings of finished items following back-to-back months of depletion.
Filipino manufacturing firms also reported improvements in supply chains, which resulted in shorter delivery times for inputs in May. However, the extent to which delivery times improved was fractional overall amid some ongoing reports of material scarcity.
Turning to prices, the latest survey period highlighted a renewed intensification of price pressures. Firms noted that high energy, material and supplier costs were passed on to clients in response to sharper cost inflation. That said, the rates of inflation in input prices and output charges were softer than their respective series averages.
Looking ahead, Filipino goods producers remained broadly optimistic in regards to future growth in output. Approximately 41% of PMI survey panelists anticipate expansions in production in the coming 12 months, with hopes that new projects and stronger demand will drive growth. However, the degree of confidence moderated to an 11-month low and remained historically subdued.
