Factory activity grows at slower pace in May

MANILA, Philippines — Growth in the Philippine manufacturing sector weakened last month due to softer demand, particularly from international markets.

In a statement yesterday, S&P Global said that the Philippines’ manufacturing purchasing managers’ index (PMI) fell to 50.1 in May from the previous month’s reading of 53, showing stagnating operating conditions.

A PMI reading over 50 signals growth, while below 50 means a contraction.

Generated from a survey of around 400 manufacturers, the PMI takes into account new orders, output, employment, suppliers’ delivery times and stocks of purchases.

“The promising growth observed at the beginning of the second quarter signaled a notable cooling in May, according to the latest PMI data. While new orders continued to increase, they did so at a slower pace, overshadowed by contractions in other areas,” S&P Global Market Intelligence economist Maryam Baluch said.

S&P Global said Filipino manufacturers faced challenges in international markets, with new export orders posting a bigger decline in May.

It was also the largest contraction since November last year.

“As global trade tensions escalate, the outlook for overseas demand appears increasingly precarious,” Baluch said.

The softer demand weighed on output, which declined in May, marking the second contraction in the last three months.

As growth in new orders slowed, manufacturers’ buying activity posted a slight uptick, but was the weakest in 18 months.

Manufacturers also reported longer lead times for receiving essential materials and supplies, affecting the replenishment of inputs.

Employment in manufacturing in May also marked its first decline in four months due to resignations and non-replacement of those roles.

With limited manpower, manufacturers saw a build-up in backlogs.

On a brighter note, Baluch said inflationary pressures remain modest and could support demand moving forward.

“The stability of price pressures may also provide a necessary buffer against the challenges posed by a cool down in new orders and external market uncertainties,” Baluch said.

While manufacturers expressed hope that new orders will continue to rise and drive output for the year ahead, the level of sentiment was the third weakest ever.