Still buoyant at above 50; signals strong H2
PHILIPPINE business conditions remained buoyant despite a slip in the Purchasing Managers’ Index (PMI) last month, which the survey said signaled still strong economic growth in the second half of 2016.
The seasonally adjusted PMI of 55.3 in August was down from 56.3 in July, according to a survey sponsored by Nikkei and produced by IHS Markit.
PMI is a composite index calculated as the weighted average of five individual sub-components: new orders, output, employment, suppliers’ delivery times, and stocks.
Despite easing slightly from the previous month, the rate of PMI growth remained marked, the August 11 to 23 survey showed. Readings above 50 signals an expansion.
Nikkei said on Thursday the August Philippine PMI signals “a further improvement in operating conditions in the manufacturing sector.”
It did not give year-on-year comparative data, noting the monthly survey started only in January 2016.
“Strong expansion in new orders and output continued to drive growth in the Filipino manufacturing sector in August. To take advantage of greater sales volumes, some firms hired additional staff members and increased their inventories,” Nikkei said.
The survey results pointed to another sharp expansion in new businesses placed with Filipino manufacturers.
Nikkei said a broad-based rise in PMI was observed in most of the sub-components, as new export orders increased while firms scaled up production in August.
“In turn, this led to another steep build-up of post-production inventories,” it said.
Companies also raised their purchases in August, some of which were placed directly into stock that resulted in a rise in pre-production inventories.
On the downside, the rate of job created eased even if companies hired additional staff to increase operating capacity.
“Input costs increased again in August. That said, the rate of input price inflation was the least marked in six months,” according to Nikkei.
“Some firms passed higher input costs on to their clients with output prices rising further,” it added.
IHS Markit noted the strong Manufacturing PMI continues to reinforce a strong growth outlook for the Philippine economy in the second half of 2016.
“IHS Markit forecasts that the Philippines economy will grow at . . . around 6.5 percent in calendar 2016, and will be one of the fastest growing emerging markets in the world this year,” Rajiv Biswas Asia-Pacific chief economist for IHS Markit, said.
The economy grew by 7 percent in the second quarter of the year, bringing the first half growth to 6.9 percent, the upper end of the government’s 6-percent to 7-percent target.
Industrial output rebounded in June, both in volume and in value, from a year earlier.
The latest Monthly Integrated Survey of Selected Industries (MISSI) released by the Philippine Statistics Authority (PSA) showed basic metals largely accounted for the increase.
The volume of production index (VoPI) in June increased by 8.5 percent from a 1.7- percent decline a year earlier, compared with 7.3 percent in May.
The value of production index (VaPI) rose by 4.7 percent from a 7.-percent decline in June 2015. The growth was higher than the revised 2.7-percent increase a month earlier.