THE PHILIPPINES and many other major Asia-Pacific economies will not be able to rely on manufacturing to fuel growth just yet, S&P Global Ratings said in an April 29 report, noting that “despite improvement in PMI (purchasing managers’ index) data, the region’s industrial production data continue to be weak.”

“Two factors suggest that manufacturing still faces some challenges,” S&P said in its report, titled: Asia-Pacific Economic Snapshots: Asian Manufacturing May Stay Weak that was e-mailed to journalists on Monday.

“First, the electronics sector, which is influential in industrial production in many countries in Asia, is still weak. A buildup of inventories over the past year has led to an oversupply in the market,” it explained.

“Second, retail sales activity in the US and Europe has been moderating. The two regions are large consumers of Asian products.”

Noting that many “PMI readings ticked up across Asia” in March, particularly in the more trade-sensitive economies of China, Singapore, South Korea and Taiwan, the report said this picture was “in stark contrast with industrial production figures” that have shown “declining momentum” especially from late last year to February.

At the same time, the report noted a “general downward trend” in both industrial production and PMI “since the beginning of 2018.”

Hence, the report said, “despite the bright spot provided by regional PMIs, we would caution against expecting a bottom in Asian manufacturing activity until industrial production numbers start stabilizing.”

The Philippines, in particular, saw manufacturing business conditions improve at the slowest pace in eight months in March, as output increased at the softest rate in seven, according to the latest monthly survey IHS Markit conducted for Nikkei, Inc. that blamed softer demand for Philippine goods abroad and port congestion. Among the seven tracked members of the 10-country Association of Southeast Asian Nations, Philippine manufacturers saw the third-fastest pace of expansion, down from the second spot in February, as Myanmar led the list and Vietnam followed in second place.

But while the Philippines has consistently recorded above-50 PMI readings since the country’s survey began about three years ago, reflecting improvement of business conditions from the preceding month, latest Philippine Statistics Authority (PSA) data show volume of factory production — as measured by the Monthly Integrated Survey of Selected Industries (MISSI) — posting the third straight month of year-on-year contraction at -8.5% in February. On a full-year basis, volume of production performance had actually turned around to a seven percent expansion last year from 2017’s 0.5% contraction.

The PSA is scheduled to report March MISSI data on May 7, together with April inflation, March merchandise trade and first-quarter farm production figures on May 8, as well as first-quarter GDP data on May 9.

Slowing manufacturing is not the only factor weighing on prospects for Philippine gross domestic product growth, which S&P now sees clocking in at 6.3% this year — down from 6.4% previously — from 2018’s actual 6.2%, picking up to 6.5%, 6.6% and 6.7% in 2020, 2021 and 2022, respectively.

Even as the 2019 national budget was enacted in mid-April after a four-month delay that prompted S&P and Fitch Ratings, as well as a host of multilateral organizations to temper their GDP growth projections for the Philippines this year, the resulting weak public investment this semester, plus lagged effects of last year’s 175-basis-point monetary tightening on private investment and potential inflation pressures from El Niño’s impact — despite a “strong downtrend” lately in the overall rise in prices of widely used goods — all constitute risks to the country’s overall economic growth outlook, the report said.