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Philippines PMI September 2019

Philippines: Manufacturing operating conditions broadly stable in September

The manufacturing Purchasing Managers’ Index (PMI), produced by IHS Markit, ticked down to 51.8 in September from 51.9 in August. Consequently, the index edged closer to the 50-threshold that separates expansion from contraction in the manufacturing sector.

The fractionally slower expansion in September was due to softer production growth for the third consecutive month. Meanwhile, new orders rose at a quicker rate than in August, sustained by strong domestic demand, as export orders declined at the sharpest rate in the series’ history (which began in January 2016). Consequently, hiring rose only slightly, while outstanding work plunged in the month. Purchasing activity eased in September as a result of weaker production, leading to a modest increase in both input inventories and stocks of finished goods.

Turning to prices, input cost inflation jumped in September due to higher raw material prices amid material shortages. Subsequently, manufactures raised output charges, albeit at the slowest rate in over two years.

Finally, manufacturers’ confidence fell to the lowest level on record, dragged on by concerns over ongoing trade tensions, but remained positive on the whole.

Commenting on the sector’s more downbeat outlook, David Owen, economist at IHS Markit, noted:

“It appears that firms are losing hope of there being an end in sight for the US-China trade war, which looks to be dampening export orders at an accelerated pace in the Philippines. On the other hand, domestic new orders are increasing and leading to a solid rise in total demand, allowing firms to continue on their path of expanding production. […] This should support businesses in the midst of a difficult export climate.”

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