Manufacturing PMI expands in June

Philippine factory activity in June expanded at its fastest pace in two months as production rebounded and new 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 since the 49.4 reading in March.

A PMI reading above 50 denotes better operating conditions than in the preceding month, while a reading below 50 shows deterioration.

“The overall performance of the Filipino manufacturing sector remained relatively subdued as the first half of the year concluded,” Maryam Baluch, economist at S&P Global Market Intelligence said.

“However, while new orders continue to rise, they do so 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, which 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 highest PMI reading at 51.7, followed by the Philippines (50.7). Both were above the ASEAN average of 48.6.

On the other hand, 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, as well as higher reciprocal tariffs on some countries. The Philippines was slapped with a 17% tariff, the second lowest among Southeast Asian countries.

While the reciprocal tariffs have been paused for 90 days until July 9, the baseline 10% tariff remains in place.

New orders

In June, S&P Global said Philippine manufacturers reported a further rise in new orders.

“The pace of growth was slightly stronger than that recorded in the previous month, although 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 rate of output growth lagged the increase in incoming new business,” it said.

Manufacturers ramped up purchasing activity in response to better demand.

However, Ms. Baluch noted that delayed delivery times for inputs and material shortages have affected production capacity.

“Delayed delivery times for inputs and material shortages also meant that goods-producing firms in 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 first time in four months, in response to the increased demand.

S&P Global said inflationary pressures remained historically subdued in June.

“Rates of both input price and output charge inflation were slightly 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 next couple of months will be important to gauge if the sector is able to return to growth rates seen in much of last year,” Ms. Baluch said.

“Lower inflationary pressures and sustained demand will in part help Filipino manufacturers to achieve this through scope for improved pricing power. However, historically muted business confidence suggests a more subdued path for the year ahead.” — A.R.A.Inosante