S&P Global reported that the Philippines\u2019 Purchasing Managers\u2019 Index (PMI), which measures the country\u2019s factory output, fell to 50.9 in June vs. 52.2 in May. While the latest figure remained above 50 – indicating an expansion – the June reading was the weakest in 10 months. S&P cited the recent data was a result of softer growth in new orders, amid workforce reductions across local factories. <\/p>\n\n\n\n
On the other hand, production was up during the month driven by an improvement in demand from local and foreign markets as well as, new clients. Meanwhile, the rate of input prices was the weakest since October of 2020 which allowed producers to pass on the savings to their clients, thereby encouraging more demand.<\/p>\n\n\n\n
Our View:<\/strong> The Filipino manufacturing sector continued to grow in June – albeit at a slower pace. As S&P stated, workforce reductions in the manufacturing sector played a key role in the latest reading. According to the respondents for the survey, the reduction in employment was partly due to the non-replacement of voluntary resignations and some firms who actively cut back on their workforce. Corollary to this data, employment figures in April showed the manufacturing sector was among the top industries that posted the largest drop in employment at 204,000 – just behind the Agriculture and Forestry (-290,000).<\/p>\n\n\n\n Despite the softer growth this June, business confidence of manufacturers remained the strongest in 5 months. While external headwinds remain a challenge for the manufacturing sector, we believe that the sector will continue to grow modestly moving forward as it reap benefits from the decelerating inflation, pause in interest rate hikes and softer producer prices. Additionally, an improvement in demand from Chinese and other advanced economies should support the sector\u2019s growth.<\/p>\n\n\n\n