THE Philippine manufacturing sector recorded a solid growth print anew in May to perform as the region’s second fastest-growing industry sector, but experts are worried that high prices may dampen its trajectory down the line.
In the most recent ranking of Purchasing Managers Index (PMI) in the Southeast Asia region, the Philippines was the second fastest-growing manufacturing sector among seven jurisdictions with a PMI of 53.7 during the month.
The PMI is a composite index aimed to gauge the health of the country’s manufacturing sector. It is calculated as a weighted average of five individual subcomponents.
Readings above the 50 threshold signal a growth in the manufacturing sector, while readings below 50 show deterioration in the industry.
Leading the region was Vietnam’s manufacturing sector with a PMI of 53.9 during the month.
Singapore follows the Philippines with a 52.8 PMI, trailed by Myanmar’s 52.6, Indonesia’s 51.7 and Thailand’s 51.5.
The Malaysian manufacturing sector was the only jurisdiction during the month to record a contraction at 47.6.
Despite the positive projection, economists at IHS Markit said the Philippines, along with Indonesia, has the highest import inflation during the month due to weaker currencies.
“The upturn in the Filipino manufacturing sector gained further momentum in the middle of the second quarter, lifted by strengthening demand conditions. The adverse impact caused by the new tax reforms has clearly subsided,” IHS Markit Principal economist Bernard
Aw said.
“However, input cost inflation intensified in May, but some of the upward pressures are driven by a weaker exchange rate, global commodity shortages and higher oil prices, not just from new excise taxes,” the economist added.
The rising inflation pressure raises worry among local manufacturers, particularly on their profit margins.
“PMI data showed firms raising selling prices at a slower rate in May amid rising costs, suggesting that companies may have a threshold of the extent to which their customers can bear higher prices without affecting demand,” Aw said.
Overall inflation in the first four months of the year averaged at 4.1 percent. Its annual target range is at 2 to 4 percent.
The Bangko Sentral ng Pilipinas (BSP) expects this to have risen further in May, particularly forecasting the growth of consumer prices to have hit somewhere between 4.6 and 5.4 percent in May.
The BSP hiked its main interest rate by 25 basis points earlier this year to curb excessive inflationary pressures and keep the print within their target range.
The Philippine Statistics Authority (PSA) will be releasing the country’s inflation numbers this week.