The Philippine manufacturing sector saw steady growth in August, maintaining the same expansion rate as in July, according to the latest survey results from S&P Global released on Monday.
The headline S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) stood at 51.2 in August, signaling expansion for the sector. A PMI reading above 50.0 indicates growth, while a reading below that threshold suggests contraction.
“The Filipino manufacturing sector showed sustained and modest gains midway through the third quarter. Growth in output and new orders accelerated in the month, thereby highlighting improving demand trends,” noted Maryam Baluch, an economist at S&P Global Market Intelligence.
The survey highlighted the strongest increase in new orders in three months, reflecting robust domestic demand. However, new export sales declined for the first time in 2024, suggesting that the growth was driven primarily by local demand.
Despite the increase in purchasing activity, the growth rate was the lowest in five months, resulting in a slower buildup of pre-production inventories and depletion of post-production stocks.
Employment in the sector fell, and buying activity slowed, indicating that manufacturers remain cautious about future growth prospects. “Confidence levels also waned in the latest survey period and hit a four-month low, further confirming that expectations surrounding the production outlook have softened,” Baluch added.
The survey also found that inflationary pressures eased further in August, with only moderate increases in input costs and slight, softer raises in selling prices. Firms experienced longer lead times for inputs, marking a decline in vendor performance for the fourth consecutive month.
Looking ahead, Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), suggested that a continued downtrend in inflation could encourage the central bank to pursue further policy easing, potentially supporting manufacturing growth. “Easing headline inflation trend towards the central bank targets would support/justify local policy rate cuts later in 2024… This could reduce borrowing/financing costs and support a recovery in investments as well as in manufacturing/production activities locally and globally,” he said.
Inflation in the Philippines accelerated to 4.4% in July, the highest in nine months, exceeding the government’s target range of 2.0% to 4.0%. The increase was driven mainly by higher prices for housing, water, electricity, gas, and other fuels. In response, the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) cut policy rates by 25 basis points earlier this month, the first rate cut in nearly four years since the off-cycle hike in October 2023.
Official government data on manufacturing from the Monthly Integrated Survey of Selected Industries (MISSI) is scheduled for release on October 8, 2024.
No comment yet, add your voice below!