Philippines: Manufacturing operating conditions improve at more moderate pace in August
September 2, 2019
The manufacturing Purchasing Managers’ Index (PMI), produced by IHS Markit, ticked down to 51.9 in August from July’s six-month high of 52.1 in July. Consequently, the index edged closer to the critical 50-point threshold that separates expansion from contraction in the manufacturing sector.
The marginal downtick in August was largely due to weaker new order growth, which fell to an over one-year low, while businesses increased production at the slowest rate in four months. Respondents noted that the impact of the monsoons and weaker demand from abroad weighed on new sales in the month. Unfavorable weather conditions also put pressure on supply chains, causing delivery times to lengthen. Despite delays, companies increased purchasing activity and input stocks rose higher. Meanwhile, job creation rose at the quickest clip in nearly two years, which allowed firms to reduce backlogs of work, albeit only marginally.
In terms of prices, input cost inflation rose sharply due to higher raw material prices, which prompted firms to pass on costs to consumers in the form of higher output charges.
Finally, manufacturers’ confidence in the outlook ebbed in August, but remained positive overall thanks to sustained sales growth and new product lines.
Commenting on this month’s result, David Owen, economist at IHS Markit, noted:
"One note of caution from the data was another moderate fall in export demand. New orders from abroad have now fallen in ten out of the last 12 months, as trading conditions in the region remain difficult due to the US-China trade war. The economy is subsequently relying on strong domestic sales to stop growth from falling any further."
Author: Lindsey Ice, Economist