The local manufacturing sector registered a further improvement in operating conditions in May as both output and new orders grew at solid rates, the latest survey from S&P Global showed on Wednesday, June 1.

The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) settled at 54.1 last month, marginally lower than the 54.3 in April. The index, however, is still above the 50 no-change threshold that separates expansion from contraction.

The latest headline index reading has signalled a further expansion across the manufacturing sector, and one that was the second-fastest since November 2018, S&P Global said in a statement.

According to S&P Global, the sustained growth across the manufacturing sector resulted in the first rise in workforce numbers since February 2020.

Additionally, S&P Global said post-production inventories rose at the fastest pace since December 2016 as firms sought to stockpile in anticipation of further new order growth.

“On the price front, input costs and output charges continued to increase at some of the quickest rates on record. Paces of inflation slowed for the second month running from the survey highs seen in March, but remained historically elevated,” S&P Global said.

Production volumes and intakes of new orders grew at solid rates, but the expansion softened slightly from April. In contrast, foreign demand for Filipino goods contracted for the third month running.

“The downturn was solid and quickened from the preceding survey period. Anecdotal evidence highlighted that ongoing pandemic- related restrictions in China led to dampened demand and shipment delays,” S&P Global said.

The ongoing COVID-19 recovery and the relaxation of the pandemic restrictions in the Philippines however resulted in improved domestic demand conditions, according to the S&P Global panellists.

Thus, manufacturing firms increased their purchasing of pre-production inputs at a sharp rate. Additionally, panellists remained keen to build stocks as they anticipated higher sales in the coming months.

As a results, holdings of raw materials and semi-finished items rose for the ninth month running. At the same time, post-production inventories grew at the strongest rate since December 2016

Meanwhile, manufacturing backlogs of work in the country continued to be depleted in May. The fall in work-in-hand was strong overall, as firms highlighted sufficient capacity to process incoming new sales

“Demand recovery and greater production requirements resulted in a rise in payroll numbers in May. Workforce numbers increased for the first time since February 2020, and at a moderate pace. Job creation in May follows unchanged staffing numbers seen in April,” S&P Global said.