By Beatriz Marie D. Cruz, Reporter
FACTORY ACTIVITY within the Philippines expanded at a gentle tempo in August amid a “modest” enchancment in working situations, with firms ramping up manufacturing, S&P World mentioned.
The S&P World Philippines Manufacturing Buying Managers’ Index (PMI) stood at 51.2 in August, the identical studying in July.
A PMI studying above 50 denotes improved working situations from the earlier month.
“The Filipino manufacturing sector confirmed sustained and modest positive factors halfway by way of the third quarter. Progress in output and new orders accelerated on the month, thereby highlighting bettering demand traits,” S&P World Market Intelligence economist Maryam Baluch mentioned in a report.
“Nonetheless, employment fell, and shopping for exercise cooled, suggesting that producers stay cautious about progress prospects,” she added.
Primarily based on the most recent PMI knowledge, the Philippines had the second-highest studying out of five Southeast Asian nations, solely behind Thailand (52). In the meantime, Malaysia (49.7), Indonesia (48.9), and Myanmar (43.4) all confirmed contractions.
As of publishing time, there have been no knowledge on Vietnam and Singapore.
The headline PMI measures manufacturing situations by way of the weighted common of five indices — new orders (30%), output (25%), employment (20%), suppliers’ supply instances (15%) and shares of purchases (10%).
For the Philippines, S&P World knowledge confirmed that total progress in new orders was the strongest in three months.
“Nonetheless, demand from overseas prospects faltered in August, as new exports gross sales fell for the primary time for the reason that begin of the 12 months. The info thus suggesting that demand was domestically pushed,” it mentioned.
The tempo of manufacturing accelerated in August from the four-month low in July.
S&P World famous progress in enterprise necessities prompted producers to extend buying exercise in August, though the speed of enhance was the slowest in five months.
“The slowdown in shopping for exercise was reflected in a softer buildup of pre-production inventories held at producers. The upturn was slight and the weakest within the present six-month interval of accumulation,” it mentioned.
Submit-production inventories dropped for the primary time since February after 5 straight months of inventory constructing, it added.
Philippine producers had been hesitant to rent new staff in August, reversing the uptick seen in July.
“Contractions have now been famous in three of the previous 4 survey durations. Furthermore, the tenacity of products producers to finish workloads effectively, regardless of a contraction in workforce numbers, highlighted sufficient capability,” S&P World mentioned.
Inflationary pressures eased in August as enter prices rose reasonably, it mentioned.
“Promoting costs for items had been raised at a softer and solely a slight tempo, indicating that firms are partially absorbing prices in a bid to spice up gross sales and stay aggressive,” it mentioned.
There have been nonetheless delays in enter from suppliers, with vendor efficiency deteriorating for the fourth month in a row. Nonetheless, S&P World mentioned the current delays had been the “least pronounced” since Might.
“The (manufacturing) slowdown might partly be attributed to the ghost month, inclement climate that led to some work/manufacturing disruptions,” Rizal Industrial Banking Corp. Chief Economist Michael L. Ricafort mentioned.
Wanting forward, S&P World mentioned that Philippine producers count on output to increase additional within the subsequent 12 months, with its PMI studying to probably keep effectively above the 50 mark.
Nonetheless, the most recent knowledge confirmed a dip within the firms’ degree of confidence.
“Confidence ranges additionally waned within the newest survey interval and hit a four-month low, additional confirming that expectations surrounding the manufacturing outlook have softened,” Ms. Baluch mentioned.
The central financial institution’s current fee lower and anticipated easing within the fourth quarter are seen stimulating manufacturing facility exercise within the coming months, Safety Financial institution Corp. Chief Economist Robert Dan J. Roces mentioned.
“The Aug. 15 fee lower and the anticipated 25-basis-point (bp) discount within the fourth quarter might positively influence buying exercise within the coming months, as it could encourage companies to spend money on their operations, resulting in elevated demand for supplies and provides,” he mentioned in a Viber message.
The Financial Board lower charges by 25 bps at its August assembly, bringing the benchmark fee to six.25% from the over 17-year excessive of 6.5%.
Bangko Sentral ng Pilipinas Governor Eli M. Remolona, Jr. has additionally mentioned the central financial institution can lower charges by one other 25 bps earlier than yearend.
Decrease borrowing prices may additionally enhance client spending, growing the demand for manufactured items, Mr. Roces added.
Mr. Ricafort mentioned that additional coverage easing by the Philippine and US central banks could result in cheaper credit score for producers, and bolster commerce and funding exercise.
Markets are extensively anticipating the US Federal Reserve to start chopping charges this month.
