Philippines factory activities Standard & Poor’s Global said production rebounds in June and new orders rose by the fastest pace of two months.
The S&P Global Philippines Manufacturing Purchasing Managers Index (PMI) rose to 50.7 in June at 50.1 in May.
June also marks the third consecutive expansion since March 49.4 reading.
PMI readings exceeding 50 indicate better operating conditions than last month, while readings below 50 show deterioration.
“The overall performance of the Philippines’ manufacturing sector remains relatively soft,” said Maryam Baluch, economist at Standard & Poor’s Global Market Intelligence.
“But, while new orders continue to rise, they do so at a historically static rate and are under pressure from stagnant export pictures,” she added.
The Trump administration’s uncertainty about tariff policies on the Philippines and other Southeast Asian countries depends on exports from the U.S. market.
S&P Global data on the Association of Southeast Asian Countries (ASEAN) (ASEAN) showed that only two countries reported expansion of PMI in June, Thailand and the Philippines. Thailand has the highest PMI reading at 51.7, followed by the Philippines (50.7). Both are higher than the ASEAN average of 48.6.
On the other hand, Malaysia (49.3), Myanmar (49), Vietnam (48.9) and Indonesia (46.9) reported contractions in manufacturing activity.
In April, U.S. President Donald J. Trump announced that the benchmark for all of its trading partners was subject to 10% tariffs, as well as reciprocal tariffs in certain countries. The Philippines’ tariffs were slapped, the second lowest tariff among Southeast Asian countries.
Although reciprocity tariffs have been suspended for 90 days until July 9, the baseline tariffs remain in place.
New Order
S&P Global said in June that Philippine manufacturers reported further rise in new orders.
It added: “Although it remains below the average of long-term surveys, the growth rate is slightly stronger than the rate recorded last month. Anecdotal evidence attributes this latest boost to successful customer acquisition, improving potential demand trends and effective promotion efforts.”
Standard & Poor’s Global noted that production levels have resumed the expansion field, although “only part”. This is a reversal of the marginal contraction in May.
“Output growth rate lags behind the growth of new businesses,” it said.
Manufacturers respond to higher demand to strengthen their purchasing activities.
However, Ms Baluch noted that delays in delivery time from inputs and materials shortages affected production capacity.
“The delivery time of input and material shortage also means that the Philippines’ production cargo companies are unable to effectively supplement their post-production lists, reflecting the challenges faced by manufacturers in terms of growing demand,” S&P Global said.
Meanwhile, Philippine manufacturers increased their jobs for the first time in four months, a response to increased demand.
S&P Global said inflationary pressures in June remained historically damaged.
“Inflation rates of input prices and output expenses are both slightly slower than those shown in May. In the case of raising input prices, this is mainly linked to higher material costs by the group members.”
Standard & Poor Global notes that business confidence has been strengthened compared to May, but it is still SIGBelow historical level.
“The next few months will be important to measure whether the industry can recover from growth rates for most of last year,” Ms Baluch said.
“Lower inflationary pressures and ongoing demand will partly help Philippine manufacturers achieve this through scope to improve pricing power. But those uncluttered business confidence in history show that the path toward the coming year is softer.” – Arainosante
