Manufacturing sentiment improves as firms prep for demand rise

Manufacturing firms in the Philippines are growing more optimistic about future demand even as sectoral growth remained modest in July, according to data released by S&P Global on August 1.

The latest Philippines Purchasing Managers’ Index (PMI) rose slightly to 50.9 in July from 50.7 in June, indicating a continued but modest improvement in the health of the manufacturing sector. A reading above 50 signals expansion.

“While outputs and new orders continued to rise, they did so at modest and historically muted rates,” S&P Global said in its report.

The third-quarter outlook is supported by a cautious but upward trend in production, though employment growth and input purchasing remained subdued. S&P Global Market Intelligence economist Maryam Baluch described the performance as muted, but noted that sentiment among firms had improved.

“While challenges remain, growing positive sentiment hints at a more hopeful outlook for the sector,” Baluch said.

Business expectations for future output rose to a four-month high as firms began preparing for an anticipated increase in consumer demand.

The sector’s cautious stance was partially attributed to subdued inflation risks, which helped balance slower activity in hiring and purchasing.

Meanwhile, factory gate prices declined for a second straight month in June, reflecting weaker price pressures across key manufacturing subsectors. According to the Philippine Statistics Authority, the Producer Price Index (PPI) for manufacturing dropped by 0.45 percent year-on-year in June, following a 0.38 percent decline in May.

The continued decrease was largely driven by faster price declines in the computer, electronic, and optical products segment, which posted a 2.5 percent annual drop in June. This category accounted for over a third of the overall decline in the PPI for the month.

Despite the tempered pace of growth, economists noted that improved business sentiment and stable output levels may provide a firmer foundation for expansion in the second half of the year.