Philippines: Manufacturing operating conditions remain broadly stable in June
July 1, 2019
The manufacturing Purchasing Managers’ Index (PMI), produced by Nikkei and IHS Markit, edged up to 51.3 in June from 51.2 in May. The index thus remained above the critical 50-point threshold that separates expansion from contraction in the manufacturing sector.
The marginal uptick in June was the result of slightly stronger production as firms worked through pre-existing orders and increased inventories of finished goods. On the other hand, new business inflows rose at the weakest pace in nearly a year due the sharpest decline in export sales in the survey’s three-year history. Job losses extended for the fourth successive month, albeit at a weaker rate than in May. Meanwhile, firms ramped up purchasing activity in June, despite weaker demand and anecdotal evidence suggests manufacturers were attempting to build up inventories ahead of feared supply shortages. Supply-side pressures continued to ease in June as supplier delivery times shortened thanks to better conditions at the port in Manila.
In terms of prices, input costs rose only slightly in June, whereas output charges were broadly unchanged in the month. Finally, manufacturers confidence in the production outlook weakened to the second lowest in the survey’s history.
David Owen, economist at IHS Markit, commented that weak demand paired with firms’ stockpiling suggests headwinds ahead for the manufacturing sector, noting: “Altogether this suggests that there will be less incentive to raise output in the months ahead, unless firms see a strong inflow of new orders. Many companies may switch to using up their inventories, in which case activity could dry up. Firms also face notable labour market problems, as resignations were once again mentioned by a number of panelists.”
Author: Lindsey Ice, Economist