Philippine manufacturing faces slumping growth

Slower sales led firms to scale back their production volumes.

Manufacturing in the Philippines continued to expand at a muted pace as the Nikkei Philippines Manufacturing Managers’ Index (PMI) dipped to 50.9 in July from 52.9 in June. The index hit its lowest in five months. 

Nikkei noted that growth in both output and new orders cooled down in July, paired with a milder accumulation in input stocks. In addition, firms were reluctant to add new workers and raised purchasing activity at a slower rate.

The firm added that signs of softening demand spurted at the start of Q3 as new business intakes increased at the weakest pace in the survey history despite a strong pickup in overseas sales. In addition, slower sales led firms to scale back their production volumes as output growth reached a six-month low.

Meanwhile, growth in new export orders reached the fastest in just over one-and-a-half years.

The Philippine industry experienced a slacking condition in July, made evident by the ongoing decrease in work backlogs.Spare capacity weighed further on hiring as lower payroll numbers were registered for a second straight month in July.

Nikkei also noted that inflationary pressures continue to take its toll in the manufacturing industry through higher prices for raw materials, such as diesel, plastics and rice.

“One area where the Tax Reform for Acceleration and Inclusion (TRAIN) laws are still felt strongly is prices,” IHS Markit principal economist Bernard Aw said. “However, external factors are also driving inflation. Survey evidence pointed to higher oil prices and a weaker peso.”

Aw said that Input cost inflation remained marked in the manufacturing sector during July which, in turn, led to further increases in selling prices.