A decrease in new orders led the Philippine manufacturing sector to grow only slightly last month, an IHS Markit poll has found.
Results of the survey released on Monday showed that the seasonally adjusted Purchasing Managers’ Index (PMI) for the country slid to 51.9 in August from 52.1 in July, which IHS Markit described as a “modest improvement.”
The PMI is a composite index that represents the weighted average of new orders, output, employment, suppliers’ delivery time and stocks. Readings above 50 signal an expansion; below that, a contraction.
According to IHS Markit, there was a slight downward pressure on production growth last month as output expanded, albeit at its slowest pace in four months.
The slower growth was blamed on the softening growth in new orders.
“Some firms noted [a] slowdown in customer demand [on account of monsoon rains] during August. This also led to a slight deterioration in supply-chain efficiency as lead times increased marginally,” IHS Markit economist David Owen said.
“Nevertheless, firms were still able to increase stock levels,” he added.
“One note of caution from the data was another moderate fall in export demand. New orders from abroad have now fallen in 10 out of the last 12 months, as trading conditions in the region remain difficult due to the US-China trade war,” Owen said, referring to the worsening row between the world’s two largest economies that saw them imposing tit-for-tat tariffs worth billions of dollars on each other’s goods.
The Philippine economy will now rely on strong domestic sales to stop growth from falling further, he added.
IHS Markit also noted increased labor demand for the month, with firms hiring at the quickest rate since November 2017.
IHS Markit reported that selling prices also rose due to higher supplier costs. The uptick, however, was lower than the increase posted in July.
Despite these, IHS Markit said manufacturers remained positive about future activity, although the level of optimism was the second weakest since the series of polls began.
Survey results showed that 57 percent of firms were hopeful of increasing production next year because of product development, while 4 percent offered negative growth projections.