THE country’s manufacturing sector grew slightly slower in August, as the onset of the rainy season dampened demand during the period.
In its monthly release on the findings of the Philippines’s Purchasing Managers’ Index, IHS Markit said the country’s PMI dipped slightly from 52.1 in June to 51.9 in August.
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.
“Some firms noted a slowdown in customer demand due to monsoons during August. This also led to a slight deterioration in supply chain efficiency as lead times increased marginally. Nevertheless, firms were still able to increase stock levels,” IHS Markit economist David Owen said.
The report said the adverse weather conditions also led to a slight deterioration in vendor performance, the first recorded since March. Despite this, manufacturers managed to increase their input stocks for the fourth consecutive month, and at a stronger rate than in July. Purchases continued to expand solidly.
Despite the pale demand, the PMI report said firms indicated greater requirements for labor over the month, as seen through businesses raising employment at the quickest rate since November 2017.
As such, Owen expressed optimism that the country’s PMI print is still one of the highest recorded this year so far.
“Latest PMI figures showed that growth in the Philippine manufacturing sector was largely similar in both July and August. While sales growth was down from the previous month, greater hiring activity meant that the headline reading dropped only slightly to 51.9 [from 52.1],” Owen said.
Predictions of output growth in the manufacturing sector also remained positive overall, although the level of optimism was the second weakest since the series began.
In particular, around 57 percent of firms were hopeful of raising production in the coming year, often linking hopes to higher current sales and product development.
“One note of caution from the data was another moderate fall in export demand. New orders from abroad have now fallen in 10 out of the last 12 months, as trading conditions in the region remain difficult due to the US-China trade war,” Owen said.
“The economy is subsequently relying on strong domestic sales to stop growth from falling any further,” he added.
Image credits: Nonie Reyes
