PH factory growth slows as orders ease

A SLOWDOWN in new orders weighed on domestic manufacturing growth in June, S&P Global said on Monday, but industry conditions remained positive.

The country's Purchasing Managers Index (PMI) slipped to a three-month low of 51.3, down from 51.9 in May, but remained above the 50.0 mark that indicates an expansion.

While the June result "signaled a softer rate of growth, it nonetheless marked a tenth consecutive monthly improvement in the health of the Filipino manufacturing sector," S&P Global said.

Manufacturing output marked its fastest growth in six months, but new orders slowed to the second-weakest in 10 months in an indication of a less robust demand trend.

Foreign demand also eased, with new export orders hitting a three-month low.

Domestic manufacturers managed to stay ahead of production schedules and backlogs decreased at a faster pace.

Spare capacity rose and companies again reduced their workforces, with some also not replacing those who had voluntarily resigned.

"The employment picture has now deteriorated for a second straight month," S&P Global noted.

"Nevertheless, rising production volumes and hopes of increased activity in the coming months, encouraged Filipino manufacturers to ramp up their purchasing activity," S&P Global said.

Purchasing growth in June was said to be the fastest since July of last year.

Pre-production inventories also continued growing but at a slower pace as companies built up stocks.

The slowdown was attributed to a continued decline in vendor performance issues as well as traffic and customs delays.

Post-production stocks, meanwhile, also rose in June and at a faster pace.

Cost burdens increased as input price inflation was the strongest since February, albeit at a still below average rate, and leading firms to raise prices.

"Inflationary pressures remained in check, despite a renewed rise in operating costs," S&P Global Market Intelligence economist Maryam Baluch said.

"Relatively soft and subdued upticks in costs and charges could help the sector generate demand in the coming months," she added.

Despite the slowdown in new orders, Philippine manufacturers remained optimistic about 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," S&P Global said.