Philippine Manufacturing Growth in June Hits Three-Month Low

MANILA, Philippines - The Philippine manufacturing sector experienced a slowdown in June, with factory output growth easing to a three-month low, according to the Philippine Statistics Authority (PSA).

The PSA's latest Monthly Integrated Survey of Selected Industries revealed that the Volume of Production Index, which measures factory output, grew by 2.5% year-on-year in June. This was slower than the 3.2% growth recorded in May and the 2.1% growth in June 2023.

Robert Dan Roces, chief economist at Security Bank Corp., attributed the slowdown to sector-specific challenges faced by the basic metals and transport equipment industries. The basic metals industry saw reduced demand, likely due to a slowdown in construction activities in key markets, while the transport equipment sector grappled with tightening profit margins amid fluctuating fuel prices and increased operational costs.

These sector-specific issues were compounded by broader economic factors, including inflationary pressures and shifting consumer demand, which led manufacturers to adopt a more cautious approach.

John Paolo Rivera, senior research fellow at the Philippine Institute for Development Studies, also noted that inflationary pressures experienced in previous months, currency depreciation making imports of raw materials more expensive, and supply chain constraints contributed to the softer growth.

The PSA's data showed that the slowdown in the manufacturing sector was primarily driven by a 17.7% deceleration in the production of basic metals, a 8.8% drop in transport equipment, and a slowdown in the manufacture of coke and refined petroleum products, which grew by 46% compared to the previous year's 52.7% growth.

Of the remaining 19 industries monitored by the agency, eight sectors recorded output declines, led by the manufacture of wood, bamboo, cane, rattan articles, and related products, which fell from 51.2% to 60.2%.

The S&P Global Philippines Manufacturing Purchasing Managers' Index (PMI), which measures the country's monthly factory performance, also fell to 51.2 in June from 51.3 in the previous month. A reading above 50 indicates an improvement in operating conditions, while a reading below 50 signals a deterioration.

The slowdown in manufacturing growth highlights the challenges faced by the sector, including inflationary pressures, supply chain disruptions, and fluctuating demand. As the economy continues to navigate these obstacles, manufacturers will need to adapt their strategies to maintain competitiveness and drive growth in the coming months.

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