The Philippine factory activity continued to expand in June, driven by stronger output and new orders, according to the latest data.
The country's Manufacturing Purchasing Managers' Index (PMI) inched up to 50.9 in June from 50.8 in May, signaling a second consecutive month of modest improvement in operating conditions across the country's goods-producing sector.
A PMI reading above 50 denotes better operating conditions than in the preceding month, while a reading below 50 shows deterioration.
The Philippines' June PMI also exceeded the Association of Southeast Asian Nations' average of 50.5, although the regional reading eased from 51.5 in May.
The country had the third best PMI reading in June, after Vietnam's 51.8 and Thailand's 53.6.
The Philippines was ahead of Malaysia, Myanmar, and Indonesia in terms of PMI readings.
Philippine manufacturers saw output and new orders grow for a second straight month, with the increase in new orders strengthening slightly.
However, production growth eased in June, according to the latest data.
Manufacturers boosted purchases of additional raw materials and semi-finished items for the first time in four months, driven by the rise in new orders.
The increase in purchasing activity was marginal, but helped firms maintain their inventory of inputs.
A more stable employment picture in the Philippines was also noted in June, with manufacturers recording unchanged staffing levels.
This stabilization compared to job shedding seen in April and May, and suggests potential for future recruitment.
Signs of recovery in supply-chain disruption were also observed in June, as a "modest deterioration in vendor performance" was noted.
Inflationary pressures started to ease in June, with cost burdens increasing at the weakest pace in four months.
However, sharp increases in costs in April and May continued to weigh on manufacturers' sentiment.
Manufacturers remained optimistic, citing expectations of stronger demand, new product launches, and expansion into new markets.
However, overall business confidence fell to its lowest level since January, indicating that firms are cautious about the outlook.
The expansion in June reflects resilient domestic demand, gradual improvements in supply conditions, and continued business activity despite a challenging external environment.
The manufacturing sector's outlook will still depend on external demand, oil prices, foreign exchange rate movements, financing costs, and the pace of infrastructure spending.
Sustained improvements in these areas would provide a stronger foundation for manufacturing growth in the coming months.
Business confidence remains subdued as firms continue to grapple with global uncertainties, supply-chain risks, and higher input costs.
The recent cost pressures are being compounded by tighter financing conditions following recent policy rate hikes, as well as the recent wage increase for Metro Manila workers.
The June PMI uptick shows that Philippine manufacturing can still grow under pressure, but sustaining that growth means supporting workers while preserving businesses' ability to invest, employ, and compete.
