Manufacturing output rises modestly in Aug., orders fall

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    GFX-(Manufacturing)

    The operating conditions at goods-producing businesses in the country improved at a moderate rate in August, according to the latest report of IHS Markit.

    The IHS Markit Philippines Manufacturing Purchasing Managers’ Index (PMI) posted
    51.9 in August, which the report said reflected a modest improvement in the health of the Filipino manufacturing sector.

    The headline reading was down slightly from 52.1 in July, but was still one of the highest recorded this year so far, it added.

    The report said firms raised production but only modestly, as new order growth fell from July levels.

    Job numbers increased, while supply chains were stretched amid difficult weather conditions. Input and output price inflation remained relatively mild, according to the report.

    “Latest PMI figures showed that growth in the Philippines manufacturing sector was largely similar in both July and August. While sales growth was down from the previous month, greater hiring activity meant that the headline reading dropped only slightly to 51.9,” David Owen, IHS Markit economist, said.

    “Some firms noted a slowdown in customer demand due to monsoons during August. This also led to a slight deterioration in supply chain efficiency as lead times increased marginally. Nevertheless, firms were still able to increase stock levels,” Owen added.

    The report said while sales remained strong overall, some firms were impacted by monsoons as well as a drop in demand from foreign clients.

    “Adverse weather conditions also led to a slight deterioration in vendor performance, the first recorded since March. Despite this, manufacturers managed to increase their input stocks for the fourth consecutive month, and at a stronger rate than in July. Purchases continued to expand solidly,” it added.

    Owen said 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,” Owen said.

    “The economy is subsequently relying on strong domestic sales to stop growth from falling any further,” he added.

    The PMI is a weighted average of five indices: new orders (30 percent), output (25 percent), employment (20 percent), suppliers’ delivery times (15 percent) and stocks of purchases (10 percent).