THE local manufacturing sector recorded an improved performance in August this year, particularly on the rate of hiring for new employment in the sector.
In its monthly report on the country’s purchasing managers index (PMI), S&P Global said the Philippines hit a PMI of 51.2 in August, “marginally” improving from the 50.8 PMI recorded in July.
“While this signalled a stronger improvement in the health of the sector, the uptick was weaker than the series average,” S&P Global said.
A country’s PMI is meant to gauge the health of its manufacturing sector. It is calculated as a weighted average of five individual subcomponents. Readings above 50 show growth in the industry while readings below the 50 threshold signal a contraction in the manufacturing sector. A reading of 50, meanwhile, showed no change to the sector.
“August PMI data signalled an improvement in operating conditions across the Philippines manufacturing sector. Encouragingly, employment increased
strongly and at the sharpest pace since mid-2017,” Maryam Baluch, Economist at S&P Global Market Intelligence, said.
The report further said strong gains in workforce numbers helped boost the latest headline PMI figure during August.
“Firms hired additional staff for the fourth consecutive month as firms hoped for expansion in production in the coming months. Additionally, the rate of job creation was the fastest since June 2017,” the report read.
S&P Global also reported that sentiment across manufacturing firms in the Philippines remained strongly positive during August, with around half of survey respondents hopeful of an expansion in output in the coming 12 months.
“However, growing downside risks to growth challenge the sector. Already we have seen output failing to expand during the latest survey period, and factory orders falling for the second consecutive month. Furthermore, prices pressures remained persistently high,” the economist warned.
In particular, Baluch said some growth headwinds heighten concerns that inflationary pressures, supply chain disruptions, the weakening of the peso and a high interest rate environment, with further hikes expected, will squeeze demand as clients’ disposable income will take a hit.
“While the Filipino economy showed strong growth post-Covid, the following months will challenge momentum, with the PMI data already recording softer output expectations for the year ahead,” Baluch said.
Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said while the continued pick-up in foreign direct investments in recent months could support increased production and manufacturing activities in the coming months, various “offsetting factors” that may pull down these gains.
“Offsetting risk factors that could be drags for manufacturing growth for the coming months: Relatively higher prices, rising interest rates, risk of recession in the US, some continued lockdowns in China, and the continued Russia-Ukraine conflict.
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