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Philippines PMI July 2019

Philippines: Manufacturing PMI rebounds to six-month high in July

The manufacturing Purchasing Managers’ Index (PMI), produced by Nikkei and IHS Markit, rose to 52.1 in July from 51.3 in June, marking a six-month high. While the index remained above the critical 50-point threshold that separates expansion from contraction in the manufacturing sector, the index remained below the long-term average of 53.1 and the brisk growth seen in 2018.

Stronger growth in the manufacturing sector was driven by a notable increase in new orders, which rose at the fastest pace since the start of the year. The domestic economy underpinned the boost in demand as export sales fell for the second month running amid the prolonged U.S.-China trade war. Survey respondents noted that new projects and stronger consumer purchasing power were positive factors in the demand uptick. Thanks to rising demand, businesses hired new staff for the first time since February and increased production at a solid pace, albeit slower than in June. Moreover, producers ramped up purchasing activity at the fastest rate in eight months; however, supplier delivery times remained relatively stable from June, despite stronger input demand and lingering congestion at the port of Manila. Businesses also built up stocks of finished goods in July, but only fractionally as respondents reported using up previous inventories.

In terms of prices, input cost inflation remained subdued, while firms’ output charges rose only marginally. Commenting on price developments, David Owen, economist at IHS Markit, stated:

“Input prices rose at only a modest pace, with an improvement in the exchange rate with the US dollar helping to ease the impact of higher raw material prices. This fed through into the softest increase in selling prices at manufacturers since June 2017. Overall, this should help to maintain strong sales growth if demand conditions remain elevated.”

Finally, manufacturers’ outlook on future business conditions improved in July thanks to sustained sales growth and new product lines.

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