PH manufacturing regained ground in May
A pickup in domestic demand helped lift Philippine manufacturing activity back to growth territory in May, but the gains remained subdued as firms continued to grapple with supply-chain disruptions and rising costs amid the Middle East war.
The country’s Purchasing Managers’ Index (PMI), a widely watched gauge of manufacturing health, rose to 50.8 in May from 48.3 in April, according to data released by S&P Global on Monday.
The latest reading pushed the sector back above the 50-point threshold that separates expansion from contraction.
According to S&P Global, the improvement was driven by a fresh increase in new orders as manufacturers reported stronger customer demand. This encouraged firms to raise production at the fastest pace in three months.
The recovery, however, appeared to be driven almost entirely by the domestic market as new export orders fell at the sharpest pace since July 2020.
“The latest PMI data for the Filipino manufacturing sector presented a mixed picture. While manufacturers registered renewed growth in output and new orders, supply-chain disruption and cost pressures worsened as the Middle East conflict entered its third month,” said Maryam Baluch, economist at S&P Global Market Intelligence.
As it is, the intensifying supply chain disruptions caused lead times to lengthen to one of the greatest extents in nearly a year and a half.
Meanwhile, rising inflation drove operating expenses higher, adding to cost pressures across the sector. Employment conditions also deteriorated, with manufacturers continuing to shed jobs, resulting in the sharpest decline in factory employment in two years.
Not yet a recovery
For Leonardo Lanzona, economist at Ateneo de Manila University, the return to growth signals stabilization rather than a recovery.
“Philippine manufacturing bounced back from April’s contraction, but the S&P Global data makes clear that supply-chain pressures are still actively biting,” Lanzona said.
“When delivery times are stretched and input costs remain elevated due to Middle East-linked shipping disruptions, the PMI methodology actually flatters the headline number. Slower deliveries mechanically push the index upward even when conditions on the ground are deteriorating,” he added.
Still, manufacturers appeared increasingly optimistic about the year ahead.
S&P reported that confidence regarding future output had climbed to its highest level in 18 months as firms expressed hopes that demand conditions would improve.
For Lanzona, however, a genuine recovery would require a convincing expansion in new orders, resumption in hiring and relief in input-cost pressures.
“What we have is a sector that scraped back above the neutral line while still navigating one of the most disruptive supply-chain environments since 2022. That’s resilience at the margin—not recovery,” he said.
