A gauge of manufacturing growth in the Philippines fell to a three-month low in June 2024 on weak demand, according to a survey by S&P Global.
The headline S&P Global Philippines Manufacturing Index (PMI)—a composite single-figure indicator of manufacturing performance—decelerated to 51.3 in June from 51.9 in May.
“While the latest reading signaled a softer rate of growth, it nonetheless marked a tenth consecutive monthly improvement in the health of the Filipino manufacturing sector,” S&P said. An index above 50.0 suggests continued growth.
“Propping up the manufacturing sector was the sustained rise in production levels. Output rose solidly and at the strongest pace in six months,” it said.
S&P noted, however, a cooldown in new order growth, indicating a weaker improvement in underlying demand trends in June.
Easing further from April, the latest upturn was the second-weakest in the ten-month sequence of growth, it said.
“Additionally, foreign demand for Filipino manufactured goods also eased on the month. The rate of growth in new export orders slowed from May’s recent high, to a three- month low,” S&P said.
“With demand trends cooling, manufactures were able to keep on top of their workloads. Backlogs were depleted at a quicker rate, which was the most pronounced in three months,” it said.
Maryam Baluch, economist at S&P Global Market Intelligence, said while strong improvements in demand trends earlier in the second quarter allowed manufacturing firms to raise their production volumes at a solid and sustained rate in June, the recent cooling in demand conditions could mean weaker upticks in output heading into the second half of the year.
“Moreover, while growth in output fed through to higher purchasing activity, it failed to translate into job creation. The second consecutive month of job shedding reflected the lack of pressure on operating capacity within the sector, as backlogs were depleted sharply,” Baluch said.
“Future expectations also retreated, further alluding to softening sentiment in the outlook. However, inflationary pressures remained in check, despite a renewed rise in operating costs. Relatively soft and subdued upticks in costs and charges could help the sector generate demand in the coming months,” she said.
S&P said increasing spare capacity forced firms to trim their workforce in June.
“There were also some reports of the non- replacement of voluntary leavers. The employment picture has now deteriorated for a second straight month. Nevertheless, rising production volumes and hopes of increased activity in the coming months, encouraged Filipino manufacturers to ramp up their purchasing activity. The rate of growth quickened on the month to the fastest since July 2023,” S&P said.
“Looking ahead, manufacturers maintained a positive outlook for production over the coming year, with hopes that improved demand conditions would support further output expansions. However, the level of optimism dimmed from May’s recent high and was weaker than the series average,” it said.