THE drop in consumer demand caused the performance of the Philippine manufacturing sector to slip in July, according to a report released on Wednesday.
Despite this, data from international think tank IHS Markit showed that the Philippine manufacturing sector was the second best performer in Southeast Asia.
IHS Markit announced on Wednesday the latest results of the Philippines Purchasing Managers’ Index (PMI), which showed a notable slowdown to 50.9 in July, from the 52.9 recorded in the previous month.
The PMI is a composite index that gauges 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 indicate deterioration.
IHS Markit said the growth in both output and new orders “slowed noticeably” in July, accompanied by a milder accumulation in input stocks. Firms were also seen to be reluctant to add new workers and purchasing activity was at a slower rate.
IHS Markit principal economist Bernard Aw said the slowdown raises concerns on the overall health of the manufacturing industry. “New business grew at a much slower rate in July after a solid second quarter, despite a strong pickup in export sales.
“Slowing demand presents a worrying development and raises questions whether the recovery from the rollout of new excise taxes at the start of this year is losing steam,” Aw said.
“Input cost inflation remained marked in the manufacturing sector during July which, in turn, led to further increases in selling prices. Although charges were raised at a notable pace, the rate of increase remained far weaker than that of costs, suggesting pressure on profit margins,” he added.
Second best performer
Despite the slowdown and concerns over the decline in demand, the Philippine manufacturing sector was the second best performer in the region.
The Asean PMI slipped to a four-month low print in July to average at 50.4, from 51 recorded in June.
Vietnam led the pack with a 54.9 PMI, followed by the Philippines’s 50.9. Indonesia came in next with 50.5, Singapore with 50.2 and Thailand with 50.1.
The manufacturing sector of Malaysia and Myanmar was in contraction mode during the period, with their PMI at 49.7 and 47.9, respectively.
“The latest Nikkei PMI survey signaled a loss of growth momentum in Asean’s manufacturing sector in July. Moreover, confidence about longer- term output deteriorated further, painting a worrying development across the region as we move into the second half of this year,” Aw said.
Image credits: Nonoy Lacza