Philippines manufacturing activity falls to 3-month low in June

The industry showed a strong and sustained rise in output but new orders softened.

The Philippines Manufacturing PMI fell into a three-month low of 51.3 in June from 51.9 in May, according to data by S&P Global.

June highlighted a notable slowdown in new orders. Aside from this, manufacturing firms in the Philippines also continued to reduce their backlogs and cut back on their staffing levels.

"Whilst 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 as we move into the second half of the year," said Maryam Baluch Economist at S&P Global Market Intelligence.

Even as growth in output fed through to higher buying activity, it failed to 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," Maluch added.

Foreign demand for Filipino manufactured goods also slowed down in June. Likewise, the growth rate in new export orders eased from May's recent high to a three-month low. 

Given the low demand, manufacturers were able to stay atop of their workloads and backlogs werre depleted at a quicker rate, the most in three months.

The employment picture has deteriorated for second consecutive month. Firms were forced to trim their workforce numbers in June and there were reports of non-replacement of voluntary leavers.

Nonetheless, Filipino manufacturers were encouraged to ramp up their purchasing activity given the increasing production volumes and hopes of increased activity in the coming months. 

June's rate of growth has also quickened to the fastest since July 2023.

Stock building approach continues among goods producers in the Philippines, accumulating pre-production inventories running for the fourth month.

S&P data in June also characterised a renewed increase in cost burdens next to a slight decrease in May. The rate of input price 
inflation was the strongest since February amid reports of raw material shortages. However, it remained softer than the series average

Manufacturing companies eventually raised their charges but the pace of inflation slowed in June and was modest overall.

Still, manufacturers maintained optimism for production over the coming year, hoping that improved demand conditions would support further output expansions. 

But the level of optimism dimmed from May's recent high and was weaker than the series average.