THE performance of the Philippine manufacturing sector slipped at the end of 2018’s first half, as inflationary pressures remain strong for the sector, international think tank IHS Markit reported.
In Monday’s Purchasing Managers’ Index (PMI) release, IHS Markit said the Philippines was still able to record a “strong performance” despite elevated prices for and slower rises in both output and new orders for June.
The country’s PMI for the month, however, slipped to 52.9 from 53.7 in May.
The PMI is a composite index aimed to gauge the health of the country’s manufacturing sector. It is calculated as a weighted average of five individual subcomponents.
Readings above the 50 threshold signal a growth in the manufacturing sector, while readings below 50 show deterioration in the industry.
The decline in the country’s PMI pushed the Philippine manufacturing sector to the third spot in the rankings of manufacturing sector performance for the month, from its second place in the previous month.
Vietnam was, again, the fastest- growing manufacturing sector in the region in June, with a 55.7 PMI, followed by Singapore at 53.6.
Following the Philippines is Indonesia with a 50.3 PMI, Thailand with 50.2 and Myanmar with a 50 PMI.
Malaysia was the only country whose manufacturing sector recorded a contraction for the month, with a PMI of 49.5.
Higher costs: TRAIN not to blame
The international think tank said that, while the country’s manufacturing sector continued to grow at a robust and steady pace, the issue of elevated prices continue to affect the sector.
In particular, the Philippine manufacturing sector saw the second sharpest increase of cost inflation. The local manufacturing sector also recorded the quickest pace of inflation in terms of selling prices.
But unlike earlier months when the administration’s tax-reform package was one to blame, IHS Markit principal economist Bernard Aw said the rising prices in June seem to be broader based.
Aw said their data show that the Philippine manufacturing sector continued to recover from the implementation of the tax reform provisions implemented at the start of the year.
However, input costs still continued to rise sharply during the month, with both domestic and external factors responsible.
“Input cost inflation remained steep, as a combination of domestic and external factors were responsible for the upward pressure. The depreciation of the peso, increased taxes, supply shortages, higher global commodity prices, especially for fuel, all contributed to inflation,” Aw said in his commentary following the report.
In the first five months of the year, inflation averaged at 4.1 percent, with the peak hitting in May at 4.6 percent.
“As a result, factory gate price hikes remained sharp, which could feed through to consumer inflation in coming months, thereby adding to expectations for further rate hikes,” Aw said.
Image credits: Nonie Reyes