PH manufacturing sector strengthens in May

The country’s manufacturing sector gained strength in May to 53.7 from 52.7 the previous month as reflected by IHS Markit's purchasing managers’ index (PMI) survey, which was released Friday.

The Philippines’ manufacturing sector’s score was also the second highest among surveyed countries in Southeast Asia, next to Vietnam, while outpacing the indices of Myanmar and Thailand.

“The upturn in the Filipino manufacturing sector gained further momentum in the middle of the second quarter, lifted by strengthening demand conditions,” IHS Markit Principal Economist Bernard Aw said.

The report noted that with the upbeat demand, business inflows of Philippine-based firms grew at its fastest rate since November 2017 despite export’s expansion decelerated. Companies ramped up production to meet increasing orders. This also led firms to accelerate purchasing activity.

“However, input cost inflation intensified in May, but some of the upward pressures are driven by a weaker exchange rate, global commodity shortages, and higher oil prices, not just from new excise taxes,” Aw said.

“Another area of concern is the increasing pressure on Filipino manufacturers’ profit margins. PMI data showed firms raising selling prices at a slower rate in May amid rising costs, suggesting that companies may have a threshold of the extent to which their customers can bear higher prices without affecting demand,” the economist further explained.

The PMI survey also noted that as firms roll out cost-saving measures, employees were laid off in the process.

Overall business confidence in the Philippine market remained elevated last month. Majority of firms are confident of higher output in the next 12 months due to product launches, new outlets, higher sales forecast, promotional activity, and higher productivity.

PMI is a gauge of the manufacturing sector’s health. Readings above 50 signal growth while below 50 show the industry’s deterioration.