Manufacturing activity in May picks up

MANILA, Philippines - Manufacturing activity in May likely expanded after moving from a traditionally lean month of April, according to the latest Purchasing Managers’ Index (PMI) of the All-Asian Centre for Enterprise Development Inc. (ASCEND).

In May 2012, the PMI index for manufacturing rose to 59.80 percent, 4.09 index points higher from 55.71 in April 2012 and 6.07 index points higher from May 2011.

“The increases are indicative of a vibrant economy and represent a strong follow through to the first quarter growth,” ASCEND said in a research note.

The PMI for May 2012 is the highest registered in the past 12 months.

An index above 50 indicates economic expansion while an index below 50 implies a contraction.

Only one of the five indices – the Supplier Deliveries Index – slowed down from April 2012 and May 2011. The other indices are New Orders, Production, Employment and Inventories.

As compared to May 2011, the PMI for the New Orders index in May 2012 posted the largest increase among the indices, up by 10.13 index points. This indicates that the growth in the economy is demand-driven.

Compared to April 2012, however, the demand indicator indices New Orders and Production rose 6.05 and 6.91 index points, respectively.        

None of the 12 manufacturing sectors registered indices below the growth threshold, “indicating a growth that is broad based.”

Of the 355 purchasing and supply managers asked about the performance of their company in May 2012 as compared to the previous month, 54 percent said conditions remained the same, 37 percent said conditions improved, and only nine percent said their companies experienced a decline in their business activities.

The PMI is a so-called “nowcasting” tool designed to estimate economic trends and complement standard economic indicators such as gross domestic product (GDP) that require three to six months to finalize.

The PMI index for retail and Wholesale (RW) also grew at a faster pace at 57.53 in May 2012, up by 1.73 index points from the previous month.

Ascend noted that the RW index usually expands in the month before the school opening.

Compared to the same month last year, however, the May 2012 index was lower by 3.30 index points.

The index of retail and wholesale this month is recorded as the second highest for the year 2012. The highest was observed last March 2012 at over 60.0.

The PMI Services index slowed down for the second consecutive month. In May 2012, the Services index went down 0.08 index points to 63.45 from 63.53 in April and from 64.72 in March.

“The PMI Services Index still hovers within a very high performance altitude,” said ASCEND.

 Since 2010, the PMI Services index has been consistently above the growth threshold “indicating consistent economic growth.”