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MANILA – Manufacturing activity likely picked up pace in May, hitting close to a two-year high.
According to the Philippine Institute of Supply Management, the purchasing managers index for manufacturing reached 59.80 in May, up 4.09 points from April and 6.07 points from May last year.
As a coincident indicator, the PMI tracks current production trends, and so is the closest measure of how the economy is performing now. An index above 50 reflects expansion, while a figure below that threshold signifies contraction.
The latest PMI points to a recovery from the April slowdown in manufacturing. The National Statistics Office last Friday reported that factory output decelerated, with the volume of production index growing 5.5 percent year-on-year in April, down from 8.9 percent in March.
Dr. Nick Fontanilla, executive director of Ascend Inc., said the May uptick is "indicative of a vibrant economy and represents a strong follow through to the first quarter growth."
The Philippine economy grew by a faster-than-expected 6.4 percent in the January to March period, from 4.9 percent in the same three-month period in 2011.
Fontanilla said the May expansion was broad-based, with all 12 sub-sectors registering indices above the growth threshold.
Of the five sub-indices making up the PMI, only supplier deliveries decreased month-on-month and year-on-year. The four other components – new orders, production, employment and inventories – increased.
“New orders posted the largest increase among the five PMI variables, up by 10.13 index points, suggesting that the growth in the economy was demand-driven,” Fontanilla said, citing year-on-year changes.
Month-on-month, “new orders and production, which are demand indicators, posted exceptional increases at 6.05 and 6.91 index points, respectively,” he said.
Thirty-seven percent of the 355 purchasing managers surveyed for May said business conditions improved, higher than the 28 percent who said the same the month before. Only nine percent of the respondents said business worsened last month, down from the 13 percent in April.
Fifty-four percent said business conditions were unchanged, also down from the previous month’s 59 percent.
Retail-wholesale sector up prior to school opening
Meanwhile, the PMI for the retail and wholesale sector in May registered 57.53, an increase of 1.73 index points from the previous month.
“The RW index usually goes up during the months immediately prior to school opening in June,” said Fontanilla.
Year-on-year, the PMI however fell 3.30 index points. Despite this drop, the index has been on growth mode in the last 28 months.
Of the five variables making up the index, only supplier deliveries registered an increase year-on-year. The four others – purchases, sales revenues, employment and inventories – fell from a year ago.
Month-on-month, purchases and employment dropped, while sales revenues, supplier deliveries and inventories increased.
Out of 93 purchasing managers polled, 29.5 percent said conditions improved, down from 31 percent in April. Those who said conditions worsened comprised 6.8 percent, also down from 10 percent. The number of respondents who said conditions didn’t change rose to 63.6 percent from 59 percent previously.
Lastly, the services PMI fell for a second consecutive month, settling at 63.45, but still above the growth threshold.
Four of the six variables making up the index – outstanding business, price charge, average operating costs and employment – fell, while business activity and new orders increased.
Of the 144 purchasing managers surveyed, 42 percent said they enjoyed expansion, up from 40 percent in April. Ten percent suffered a contraction, down from 12 percent previously.
Forty-eight percent said business conditions were unchanged in May, the same proportion in April.
The survey for the May PMI was done in the final five working days of that month.
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