Philippine factory activity hits 5-month high in July amid Middle East conflict impacts

MANILA, Philippines — Factory activity in the Philippines accelerated to a five-month high in July as demand strengthened at its fastest pace since the outbreak of the Middle East conflict, suggesting manufacturers are regaining momentum after a sluggish second quarter. The country’s Purchasing Managers’ Index (PMI), a closely watched gauge of manufacturing activity, rose to 51.8 in July from 50.9 in June, according to a survey of about 400 companies conducted by S&P Global. READ: Philippine factory activity edges up in June The reading remained above the 50-point threshold that separates expansion from contraction and was the highest since February, marking a clear improvement from the subdued conditions that had prevailed between March and June. The headline index has now risen for three straight months and was broadly in line with its long-term average, S&P Global said. “Manufacturers in the Philippines reported stronger demand conditions in July following the more subdued conditions seen in the second quarter,” said Maryam Baluch, economist at S&P Global Market Intelligence. “Production and new order growth strengthened as a result, rising at a solid pace that was the fastest since the outbreak of the war in the Middle East,” Baluch added. New orders expanded at their fastest pace since February and outperformed the historical average, buoyed by firmer demand. Manufacturers responded by ramping up production at the quickest rate in five months, with output growth also exceeding its long-run trend. To support higher production, firms stepped up purchasing activity, with the pace of input buying accelerating from June. READ: Factory output growth slowed to 10.2% in May The stronger demand, however, came as supply chains showed fresh signs of strain. Vendor performance deteriorated at the sharpest pace since December 2024, with manufacturers widely attributing longer delivery times to disruptions linked to the conflict in the Middle East. Faced with slower deliveries, manufacturers drew down inventories to meet the increase in new orders, relying on existing stocks to sustain production and fulfill customer demand. Despite the rise in orders, firms were able to stay on top of their workloads, as shown by a renewed fall in backlogs of work. “As manufacturers continued to face stretched supply chains and a renewed pick-up in cost pressures, inventories came under strain,” Baluch said. Employment, however, was a weak spot. Staffing levels declined modestly as firms cited voluntary resignations and chose not to replace departing workers. Cost pressures also intensified in July. Companies reported that the conflict in the Middle East continued to push up input prices, with many passing the higher costs on to customers through increased selling prices. Despite the stronger performance, business confidence remained subdued by historical standards. “Firms may need clearer signs of a sustained improvement in economic conditions before resuming hiring,” she added. INQ