Manufacturing growth slows to 53.9 in June


June PMI slips to 53.9 from 54.3 in May, 55.5 a yr earlier

PHILIPPINE manufacturing expanded further in June but at a slower pace than in May and in June last year as output and new orders lost momentum amid a fall in backlogs, results of a survey sponsored by Nikkei and produced by IHS Markit showed on Monday.

The seasonally adjusted Purchasing Managers’ Index (PMI) dipped to 53.9 in June from 54.3 in May and from 55.5 a year earlier.

PMI is a composite index representing the weighted average of five individual sub-components, namely new orders, output, employment, suppliers’ delivery time and stocks.

Readings above 50 signal an expansion in manufacturing while readings below the benchmark signal a contraction, IHS Markit said.

Despite the slowdown, IHS Markit economist Bernard Aw said the manufacturing sector rounded off June on a strong note.

“That put the domestic economy on track for another quarter of robust GDP [gross domestic product]growth,” he said.

Demand for Filipino manufactured goods remained robust as new orders stayed solid despite the slower pace of expansion, he added.

The poll also said greater operational demand and higher sales encouraged manufacturers to continue hiring.

Firm external demand

While the domestic market served as the key pillar of manufacturing growth, there were signs that external demand has started contributing more to the expansion than it did the preceding months.

“Export order growth strengthened to a three-month high,” Aw said.

Aw pointed out that the strong manufacturing upturn was matched by an increase in cost pressures, but there were signs of a further easing in the inflation rate.

On the price front, the survey said cost inflation eased and took some pressure off companies to raise selling prices.

“Nonetheless, firms highlighted [the fact]that the recent peso depreciation and the higher costs of raw materials, such as copper and iron, remained an issue,” Aw said.

Lack of capacity

The poll showed that companies which saw reduced backlogs pointed to more hiring of workers, over-time work, and improved workflow processes.

Overall, the outlook for the manufacturing sector remains upbeat in the coming months, underpinned by buoyant business confidence and strong sales volumes, Aw said.

“That will augur well for the Philippine economy and its labor market,” he added.


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