The Philippine manufacturing sector further improved its performance in May as new orders and production expanded more quickly and employment picked up slightly compared to April, according to the latest S&P Global Philippines survey data.
The manufacturing sector further expanded in May 2023 as the headline S&P Global Philippines Manufacturing PMI increased to 52.2 from April’s eight-month low of 51.4 to signal a quicker improvement in operating conditions across the goods-producing sector.
The latest headline figure has extended the current run of expansion to 16 consecutive months to indicate a solid upturn, S&P Global Philippines said.
The PMI or purchasing managers’ index is an index of the prevailing direction of economic trends in the manufacturing and service sectors. It consists of a diffusion index that summarizes whether market conditions, as viewed by purchasing managers, are expanding, staying the same, or contracting.
The improvement in Philippine manufacturing health in May was driven by quicker expansions in both factory orders and manufacturing output, which have now risen each month since September 2022, according to Maryam Baluch, an economist at S&P Global Market Intelligence.
The upturn in new orders is attributed to stronger demand and acquisition of new clients. Demand from foreign markets also fared well, with export volumes growing solidly but at a slightly softer pace compared to April.
The sustained uptick in new orders resulted in an increase in hiring activity for the first time in four months, and at the strongest pace since October last year.
Buying activity also increased 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.
Manufacturing firms likewise reported improvements in supply chains, which resulted in shorter delivery times for inputs in May.
The degree of improvement in vendor performance was only fractional amid some ongoing reports of material scarcity, but it marked the first month in which delivery times have shortened since July 2019. Companies reported that improved logistics routes helped shorten delivery times.
But price pressures intensified anew, observed the report. Firms noted that high energy, material and supplier costs were passed on to clients in response to sharper cost inflation. However, 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 about future growth in output, expecting expansions in production in the coming 12 months that are anchored on hopes that new projects and stronger demand will drive growth. However, the degree of confidence moderated to an 11-month low, said Baluch.
