The Philippine manufacturing sector posted the strongest growth in the region in June, despite a slight slowdown from the growth rate it recorded in May.
On Tuesday regional business media organization Nikkei and international think tank IHS Markit announced the Philippines’s Purchasing Managers’ Index (PMI) for June at 53.9, slower than the previous month’s 54.3.
The PMI is a composite index, calculated as a weighted average of five individual subcomponents. The components include new orders, which weigh the most at 30 percent of the index; output at 25 percent of the index; employment at 20 percent; suppliers’ delivery times, 15 percent; and stocks of purchases comprising the other 10 percent.
Readings above 50 signal an improvement in business conditions on the previous month, while readings below 50 show deterioration.
Despite the slowdown, IHS Markit expressed strong optimism on the country’s manufacturing industry. “The Philippines’s manufacturing sector signaled another strong expansion in June, ending the second quarter on a positive note. Growth in output and new orders remained key drivers, which, in turn, boosted hiring and stock-building. Export growth strengthened and business optimism remained elevated,” the report read.
The June PMI of the Philippines is the fastest among Asean countries, followed by Vietnam with 52.5, Thailand at 50.4 and Singapore at 50.3.
Meanwhile, those at the below- 50 threshold were Indonesia at 49.5; Myanmar, 49.4; and
Malaysia, 46.9.
The report attributed the slight month-on-month decline to slower new business inflows.
IHS Markit economist Bernard Aw said the strong performance of the Philippine manufacturing sector in June puts the domestic economy on track for another quarter of robust GDP growth.
“While the domestic market remained the key pillar of manufacturing growth, there were signs that external demand is contributing more to the expansion. Export- order growth strengthened to a three-month high,” Aw said.
“The strong manufacturing upturn was matched with rising cost pressures, but there were signs of further easing of the inflation rate. Slower cost increases took some pressure off the need for companies to raise selling prices.
However, firms have expressed concern about the recent peso depreciation and higher costs for raw materials, such as copper and iron.
The peso has been trading within the P50 territory since the end of June this year, with Tuesday’s rate hitting P50.52 to a dollar. The total traded volume was at $540.3 million.
“Overall, the outlook for the manufacturing sector remains optimistic into the third quarter underpinned by buoyant business confidence and strong sales volumes. That will augur well for the Philippine economy and its labor market,” Aw added.
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