Business inflows lifted Philippine manufacturing in August

Firms have also boosted purchasing activities, accumulating more input inventories.

The Philippine manufacturing sector gets a boost after a slumping growth in July as the Nikkei Philippines Manufacturing Managers’ Index (PMI) rose to 51.9 from 50.9 in July. The recovery was fueled by the new business inflows and improved optimism despite the easing out of output growth, a joint release by Nikkei and IHS Markit revealed.

Moreover, the sector also reported new jobs after three months.

August also saw firms boosting up their purchasing activity, which contributed to a further accumulation in input inventories.

“However, the improvement in the health of the manufacturing sector was marred by strong inflationary pressures,” IHS Markit principal economist Bernard Aw said. “Input cost inflation remained elevated and similar to recent months.”

Signs of improvement in terms of client demand was also observed as order book growth was uplifted after its lows in July.

“However, survey details revealed that domestic markets were the primary driver of higher demand as export sales grew at a noticeably slower pace,” the report noted. “Growth in export orders was the weakest in the current six-month period of expansion.”

Also read: Philippine manufacturing faces slumping growth

Meanwhile, production volumes eased down its growth after nearly a year despite firmer sales growth. According to the report, an accumulation of finished goods inventories as firms reported that they already have sufficient stocks to meet demand.

For post-production, stocks rose for a second straight month, with another solid rate of increase indicated.

The report also found that improved labour capacity pushed firms to work through their backlogs as the level of unfinished business fell at the steepest rate for just over a year.

In August, firms stepped up the acquisition of manufacturing inputs in order to meet greater operating demand. The move has also boosted the pre-production stocks.

“Increased demand for inputs put pressure on supply chains, which saw vendor performance deteriorating in the middle of the third quarter,” the report noted. “Firms cited other reasons for delivery delays, including inclement weather.”