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Philippines PMI September 2018

Philippines: Manufacturing PMI ticks up in September

According to data released by Nikkei and IHS Markit, the manufacturing Purchasing Managers’ Index (PMI) rose to 52.0 in September from 51.9 in August, inching further above the critical 50-point threshold that separates expansion from contraction in the manufacturing sector. Despite the uptick in the index, the average reading for the third quarter was down from the second, suggesting growth in the manufacturing sector eased somewhat in the second to last quarter of 2018.

The improvement in September came on the back of strong output growth, while new orders growth posted a solid expansion, driven by strong domestic demand as export orders declined in the month. Moreover, in response to growing demand, firms increased their hiring activity in September and backlogs of work continued to decline, with firms reporting higher productivity as a main contributor. Meanwhile, although purchasing activity picked up modestly, input inventories fell for the first time since January 2016. Supplier delivery times, however, lengthened primarily due to disruptions from the typhoon.

Inflationary pressures remained elevated in September, driven by a weaker peso against the dollar, higher prices for raw materials, and the effect of tax changes under the TRAIN laws. Consequently, firms passed on the costs to customers by raising their selling prices at the second-fastest rate in the survey’s history.

Lastly, business confidence concerning output in the year ahead fell slightly in September but remained elevated.

Commenting on September’s result, Bernard Aw, a principal economist at IHS Markit, noted that:

“The Philippines manufacturing economy likely grew at a slower pace in the third quarter, compared to the second quarter, according to the Nikkei PMI survey. However, September survey data suggest that growth in coming months is likely to be resilient, while strong cost inflation remains a key concern.”

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