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Philippines PMI May 2018

Philippines: Manufacturing PMI edges higher in May

The manufacturing Purchasing Managers’ Index (PMI) rose to 53.7 in May, up from 52.7 in April, according to a release provided by Nikkei and IHS Markit. With the increase, the PMI moved further above the critical 50-point threshold that separates expansion from contraction in the manufacturing sector.

May’s increase was buttressed by higher output and new orders, suggesting that the adverse effect on the private sector caused by the new tax reforms effective since 1 January 2018 has subsided. New orders expanded at the fastest pace since November 2016, pushing manufacturers to increase production, which reached a five-month high. Backlogs of work declined despite buoyant client demand, and employment increased at a marginal rate as manufacturers did not face significant capacity constraints. Regarding price developments, input costs rose sharply due to a weaker peso, higher prices for commodity and the impact of the tax reform on the economy. Consequently, firms passed on higher productions costs to customers and selling prices rose.

Commenting on input prices in May, Bernard Aw, Principal Economist at IHS Markit, noted that:

“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. Brent crude prices gained nearly 7% in May while the peso has depreciated over 4% so far this year.”

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