AMID weak demand and the decline in manufacturing jobs, the country’s Purchasing Managers Index (PMI) dropped to its lowest in two years.
The S&P Global Market Intelligence PMI showed the country’s manufacturing performance fell below the neutral 50 threshold at 49.7. This was the first contraction or below 50 since 2021.
Rizal Commercial Banking Corporation Chief Economist Michael L. Ricafort noted that prior to this, the country’s PMI was above the 50-mark for 23 months or since September 2021.
“Weak underlying demand trends as pointed by the first drop in new orders in a year and the ongoing reductions in staffing levels show visible cracks in the sector,” S&P Global Market Intelligence Economist Maryam Baluch said.
“Moreover, headwinds from the high interest rate environment and inflation, as well as China’s less-than-expected post-Covid growth, could potentially result in subdued growth in the coming months,” she added.
Ricafort also blamed high inflation which dampened consumption and spending for the manufacturing sector. The high interest rate environment also discouraged investments for the sector.
“Softer manufacturing and services PMI data for many developed countries around the world, also mostly in contraction mode or below 50, also partly reduced the demand for exports and dragged on local manufacturing activities,” he added.
However, Baluch said many companies were already gearing up for higher sales in the coming months, with buying activity and stocks raised in August.
The report also stated that manufacturers expect growth in the next 12 months. S&P Global Market Intelligence said confidence levels rose to a seven-month high, as 60 percent of panelists predict an expansion toward the end of the year.
The firms, the think tank said, remain hopeful that the launch of new products will spur manufacturing sector growth in the coming months.
“Firms were keen to build on their stocks and create buffers in anticipation of greater sales in the months ahead. Pre-production holdings registered a fresh expansion, albeit only a fractional one, while holdings of finished goods were raised for the second straight month and at a rate that was quicker than that seen in July,” the report stated.
Earlier, Philippine Statistics Authority (PSA) data showed the Volume of Production Index (VoPI) posted a 3.4-percent growth in June 2023.
This was slower than the 7.7 percent in May 2023 but was an improvement compared to the contraction of 0.04 percent in June 2022.
Based on the data, the manufacture of food products contracted 3.2 percent; fabricated metals, 36.4 percent; and beverages, 7.7 percent in June 2023.