June manufacturing growth ‘marginal’
Credit to Author: ANNA LEAH E. GONZALES| Date: Mon, 01 Jul 2019 16:23:52 +0000
THE Philippine manufacturing sector remained subdued last month after only recording slight growth, a IHS Markit survey found.
Results of the survey released on Monday showed that the seasonally adjusted Purchasing Managers Index (PMI) for the country marginally improved to 51.3 in June from 51.2 in May. The latest figure is the highest since March’s 51.5.
The PMI is a composite index representing the weighted average of new orders, output, employment, suppliers’ delivery time and stocks. Readings above 50 signal an expansion; below that, a contraction.
“The marginal rise in the headline index was mostly due to a greater expansion in output [among] Filipino manufacturers. Anecdotal evidence generally related the increase with higher demand for goods, although it was also driven by firms working through pre-existing orders and raising postproduction stocks,” IHS Markit said in a report.
The results, however, also showed that new orders increased at the softest rate in 11 months due to the decrease in new orders from abroad.
Employment also declined for the fourth consecutive month, as firms failed to replace those who resigned. This drop, however, was softer than the one recorded in May.
In terms of prices, IHS Markit said manufacturers imposed a “subdued increase in input costs.” Only 7 percent of them, it added, reported an increase in supplier prices due to the higher dollar rate and increased taxes.
Purchasing activity rose in June as companies expanded their input-buying at the sharpest rate in seven months.
“Despite new order growth easing, businesses reportedly wanted to build up input stocks, with some noting a risk of supply shortages,” IHS Markit said.
Output expectations also weakened slightly last month, according to the report.
It said, however, that despite the weak production outlook, firms remained generally optimistic, as they expected an increase in new orders and company growth to boost activity in the coming months.
“Certain factors suggest that Filipino manufacturers were facing a weakening growth environment in June. Output growth was solid, but new orders increased only modestly and at the slowest pace since last July,” IHS Markit economist David Owen noted in the report.
“Instead, firms appeared to focus on stock-building; finished goods inventories grew for the second consecutive month, while input stocks also rose as some panelists (companies) hinted at risks of supply shortages,” he added.
“Altogether, this suggests that there will be less incentive to raise output in the months ahead, unless firms see a strong inflow of new orders.
Many companies may switch to using up their inventories, in which case activity could dry up. Firms also face notable labor market problems, as resignations were once again mentioned by a number of panelists,” the economist said.
According to him, improvement in supply chains, easing port congestion and subdued price pressures would help minimize short-term risks to manufacturers.
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