PHL PMI improves to 4-month high in June, but orders slowest in 11 months

The Philippine manufacturing sector posted slight gains in June, results of the monthly survey conducted by IHS Markit for Nikkei Inc. showed, to mark the best reading in four months.

But new orders were not encouraging, having registered a slowdown and a decline, according to IHS Markit.

The Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI) rose to 51.3 in June, slightly higher than the 51.2 in May, and highest since it registered 51.5 in March.

The PMI is a composite indicator of the manufacturing sector’s performance, with 50.0 as the threshold. A reading above 50 indicates growth, and a reading below 50 indicates a contraction.

Nikkei attributed the increase to an output, with Filipino manufacturers working through pre-existing orders and raising post-production stocks.

New orders, on the other hand, have grown at its slowest pace in 11 months last June. This is also the eighth consecutive month of declines in new orders from abroad.

“Certain factors suggest that Filipino manufacturers were facing a weakening growth environment in June. Output growth was solid, but new orders increased only modestly and at the slowest pace since last July,” David Owen, economist at IHS Markit, said in an accompanying statement.

Manufacturers appeared to have focused on stock-building as finished goods inventories grew for the second straight month while input stocks rose as some panelists hinted at risks of supply shortages.

“Altogether this suggests that there will be less incentive to raise output in the months ahead, unless firms see a strong inflow of new orders,” Owen said.

“Many companies may switch to using up their inventories, in which case activity could dry up. Firms also face notable labor market problems, as resignations were once again mentioned by a number of panelists,” he added. —Jon Viktor Cabuenas/VDS, GMA News