MANUFACTURING conditions in the Philippines improved in July although the industry’s performance remains relatively subdued, S&P Global reported on Friday.
The Philippines’ headline purchasing managers’ index (PMI) edged up to 50.9 in July from 50.7 in June. While modest, S&P Global said it signaled a returning growth momentum.
The result marked an uptick for the second consecutive month and was said to be the strongest improvement in operating conditions since April.
Production also increased for a second month in a row to a three-month high. This was primarily driven by an increase in incoming orders and a rise in finished goods inventories, partly attributed to anticipation of future sales and front-loading orders from the US ahead of tariff hikes. Post-production inventory growth rates were also at their fastest in eight months.
New orders also rose, with demand for Philippine-made goods rising for a fourth consecutive month. Foreign sales also contributed while new export orders also increased for the first time in five months. However, the overall growth rate for new orders slightly softened and was still modest compared to the long-run average.
This was reflected by a loss of momentum in hiring and purchasing activity, which only recorded marginal increases.
“While signaling further improvement across the Filipino manufacturing sector, PMI data from the opening month of the third quarter still painted a picture of a muted overall performance,” said Maryam Baluch, economist at S&P Global Market Intelligence.
“Output and new orders continued to rise, but paces of expansion remained historically subdued. Purchasing and employment also rose at slower rates, reflecting underlying caution among manufacturers,” she added.
S&P Global said inflationary pressures remained subdued in July. Input price inflation was at its slowest in 14 months and some firms conducted bulk buying to manage costs due to the higher operating expenses associated with increased costs of raw materials.
Charge inflation, meanwhile, was steady and marginal, signaling the need for firms to limit price hikes due to muted demand.
Year ahead business confidence rose to a four-month high as companies were optimistic about production growth and improved demand and also cited plans for marketing initiatives. Despite this, positive sentiment was still below the series average.
“Inflationary pressures were notably muted, providing a silver lining to the otherwise cautious landscape,” Baluch noted.
“At the same time, optimism regarding future production levels surged to a four-month high, as firms strategically prepared for anticipated demand,” she added.
“While challenges remain, growing positive sentiment hints at a more hopeful outlook for the sector.”
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