The Philippine manufacturing sector slowed notably in May after experiencing a strong rebound in April, with the country’s headline S&P Global manufacturing purchasing managers’ index (PMI) barely avoiding a contraction in growth.
The just-released S&P Global Philippines (PMI), a composite single-figure indicator of manufacturing performance, fell to 50.1 in May from 53 in April.
The May index barely missed falling below 50, which could have indicated a growth contraction in manufacturing.
The S&P Global Report released on Monday said output in May already fell into contraction territory, while growth in new orders sagged, with the downturn in demand from foreign markets putting additional weight on total new sales.
“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,” Maryam Baluch, economist at S&P Global Market Intelligence, said.
Notably, Baluch said output, employment and the inventories of both purchases and finished goods all showed fresh declines.
Deteriorating global demand
The report said Filipino manufacturers faced challenges in international markets, with May data indicating a larger decline in new export orders, following broadly steady export sales in March and April. The rate of contraction here was fractional but the strongest since November of last year, the report said.
“The situation was exacerbated by deteriorating demand from foreign markets, with May witnessing a sharper drop in new export orders. As global trade tensions escalate, the outlook for overseas demand appears increasingly precarious,” Baluch added.
Local pressures subdued
On a brighter note, Baluch said that inflationary pressures remain modest and historically subdued, which could play a crucial role in supporting demand moving forward.
“The stability of price pressures may also provide a necessary buffer against the challenges posed by a cooldown in new orders and external market uncertainties,” Baluch said.
PH less export-reliant
Michael Ricafort, Rizal Commercial Banking Corp. chief economist, said the May PMI is the slowest in two months.
He said some exporters may be on a wait-and-see stance on their production, capacity and inventories due to US President Donald Trump’s reciprocal tariffs on the US’ trading partners.
“However, offsetting positive factors include midterm election-related spending that benefited some local manufacturers, relatively resilient local economy that is still among the fastest growing in Asia, (and) being less reliant on merchandise exports, compared with major Asean countries, whose goods exports are three to five times higher than Philippine merchandise exports,” Ricafort said.
Reinielle Matt Erece, economist at Oikonomia Advisory & Research Inc., said the drop in PMI is mainly caused by slower growth in demand from both domestic and international markets.
“Global trade uncertainty may still weigh down demand for exports, and the exit from the election may also contribute to the slight drop this May,” Erece said.
“We expect a recovery in the country’s PMI if trade agreements and negotiations with other countries, especially the US, become successful,” he said.
