PHILIPPINE factory activity in June expanded at its fastest pace in two months as production rebounded and latest orders rose, S&P Global said.
The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) improved to 50.7 in June from 50.1 in May.
June also marked the third consecutive expansion because the 49.4 reading in March.
A PMI reading above 50 denotes higher operating conditions than within the preceding month, while a reading below 50 shows deterioration.
“The general performance of the Filipino manufacturing sector remained relatively subdued as the primary half of the 12 months concluded,” Maryam Baluch, economist at S&P Global Market Intelligence said.
“Nonetheless, while latest orders proceed to rise, they accomplish that at a historically muted pace, weighed down by a stalled exports picture,” she added.
Uncertainty over the Trump administration’s tariff policy has weighed on the Philippines and other Southeast Asian countries, that are reliant on exports to the US market.
S&P Global data on the Association of Southeast Asian Nations (ASEAN) showed only two countries reported an expansion in PMI in June, Thailand and the Philippines. Thailand had the best PMI reading at 51.7, followed by the Philippines (50.7). Each were above the ASEAN average of 48.6.
Then again, Malaysia (49.3), Myanmar (49), Vietnam (48.9) and Indonesia (46.9) reported a contraction in manufacturing activity.
In April, US President Donald J. Trump announced a baseline 10% tariff on all its trading partners, in addition to higher reciprocal tariffs on some countries. The Philippines was slapped with a 17% tariff, the second lowest amongst Southeast Asian countries.
While the reciprocal tariffs have been paused for 90 days until July 9, the baseline 10% tariff stays in place.
NEW ORDERS
In June, S&P Global said Philippine manufacturers reported an extra rise in latest orders.
“The pace of growth was barely stronger than that recorded within the previous month, even though it remained below the long-run survey average. Anecdotal evidence attributed this latest uptick to successful customer acquisitions, improving underlying demand trends, and effective promotional efforts,” it added.
S&P Global noted that production levels returned to expansion territory, although “only fractionally.” This was a reversal of the marginal contraction seen in May.
“The speed of output growth lagged the rise in incoming latest business,” it said.
Manufacturers ramped up purchasing activity in response to raised demand.
Nonetheless, Ms. Baluch noted that delayed delivery times for inputs and material shortages have affected production capability.
“Delayed delivery times for inputs and material shortages also meant that goods-producing firms within the Philippines were unable to replenish their post-production inventories effectively, reflecting the challenges faced by manufacturers in effectively expanding production amid growing demand,” S&P Global said.
Meanwhile, Philippine manufacturers increased employment for the primary time in 4 months, in response to the increased demand.
S&P Global said inflationary pressures remained historically subdued in June.
“Rates of each input price and output charge inflation were barely slower than seen in May. Where input prices were raised, this was primarily linked by panelists to higher material costs,” it said.
S&P Global noted that business confidence strengthened compared with May but was still significantly below historical levels.
“The subsequent couple of months will probably be essential to gauge if the sector is capable of return to growth rates seen in much of last 12 months,” Ms. Baluch said.
“Lower inflationary pressures and sustained demand will partially help Filipino manufacturers to attain this through scope for improved pricing power. Nonetheless, historically muted business confidence suggests a more subdued path for the 12 months ahead.” — A.R.A.Inosante