Philippines: Manufacturing PMI hits lowest level in its history
September 4, 2017
The Manufacturing Purchasing Managers’ Index (PMI) decreased from 52.8 in July to 50.6 in August—the weakest reading in its history—according to a release provided by Nikkei and IHS Markit. The PMI nevertheless remained above the 50-point threshold which separates expansion from contraction in the manufacturing sector.
The deceleration in August was caused by lower growth rates in both new orders and output compared to July, which led to a fall in employment for the first time in the PMI’s history. A fall in export sales—the first in 18 months—contributed to the slowdown in new orders. A lack of raw materials disrupted production schedules, negatively impacted the growth of output. A weak exchange rate led to higher prices for imported raw materials, and input cost inflation subsequently picked up to a four-month high. Manufacturers passed some of these costs to clients in August by raising their selling prices compared to July. All in all, short-term prospects were lower in August than in July. On a more positive note, manufacturers’ delivery times shortened and backlogs of work declined for an eighteenth consecutive month, helping manufacturers get through previously unfinished work.
Commenting on the release, Bernard Aw, Principal Economist at IHS Markit, noted that:
“While short-term prospects appeared increasingly weak, longer-term expectations remained optimistic. The majority of surveyed companies continued to anticipate output growth over the next year, suggesting that the recent slowdown could be temporary.”
Author: Edward Gardner, Economist