The Philippines’ manufacturing PMI remained subdued in September but was marginally better than the previous month’s record low, an IHS Markit/Nikkei survey found.
Results released on Monday showed a seasonally adjusted Purchasing Managers’ Index of 50.8 for the month, up slightly from August’s 50.6. It was substantially lower compared to the 57.5 posed a year earlier.
The PMI is a composite index representing the weighted average of five sub-components: new orders, output, employment, suppliers’ delivery time and stocks. Readings above 50 signal an expansion while readings below the benchmark signal a contraction.
The Philippine manufacturing sector, IHS Markit economist Bernard Aw said, had posted a second consecutive month of subdued growth.
“The survey data pointed to further slowing in output growth and a modest sales trend, while employment shrank again as firms indicated sufficient manpower to meet production demands,” he said.
September output growth was the weakest since the survey started in January 2016. Firms also blamed reduced overtime work and shortages of inputs.
Employment, meanwhile, shrank for a second straight month although the contraction softened from August.
“Despite the decrease in payroll numbers, capacity continues to be in abundance, which would weigh on hiring in the near future,” Aw nevertheless said.
The weak peso also continued to pose a problem for manufacturers.
“Not only did the cheaper currency fail to provide a boost to exports, it raised the costs of imports,” Aw pointed out.
Coupled with supply shortages due to bad weather, costs for manufacturing inputs, especially in industrial metal and paper, increased further.
The economist also noted reports of rising cost inflation affecting production levels.
“However, optimism regarding output remained high, encouraging firms to increase purchases of inputs,” he said.
The majority of the surveyed companies still expect output to rise in the next 12 months on the back of new product launches, an improving economic climate, marketing activity and business expansions.
That optimism led firms to step up input buying at the end of the third quarter, the poll found. Purchasing activity rose noticeably faster compared to the previous month, which contributed to a larger build in pre- production inventories.