PH Aug manufacturing loses steam after 2 years

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  • The Philippine manufacturing sector signaled a deterioration in business conditions in August 2023
  • This, as new orders fell for the first time in a year while output growth cooled
  • The Philippines’ Purchasing Managers’ Index read at 49.7 in August 2023, below the neutral 50.0 threshold for the first time in two years
  • Factory orders fell for the first time since August 2022 attributed to waning underlying demand conditions in addition to poor weather conditions hampering inflows of new businesses
  • Upturn in new orders from overseas markets is marginal overall
  • Manufacturers expect growth in output in the next 12 months with confidence levels rising to a seven-month high
  • Job shedding enters third consecutive month

The Philippine manufacturing sector in August lost steam after two years of growth as new orders fell for the first time in a year while output growth cooled.

The Philippines’ Purchasing Managers’ Index (PMI) read at 49.7 in August 2023, below the neutral 50.0 threshold for the first time in two years and signaling a deterioration in the health of the Philippine manufacturing sector, according to the latest survey of S&P Global.

The August PMI contrasts with 51.9 in July 2023.

“The latest data for the Filipino manufacturing sector pointed to a mixed picture,” S&P Global economist Maryam Baluch said.

While the headline PMI figure signaled an end of the growth period seen over the past two years, many companies were also gearing up for greater sales in the coming months, with buying activity and stocks raised in August, she noted.

Weighing on the headline index was the fresh contraction in factory orders which fell for the first time since August 2022. S&P Global said firms attributed falling order volumes to waning underlying demand conditions, with poor weather conditions also playing a part to hamper inflows of new businesses.

New orders from overseas markets grew in August albeit marginally and the softest seen since the current phase of growth began at the start of the year.

Following the fall in new orders, the rate at which output grew softened on the month to post the weakest expansion in a year while the latest uptick in buying activity was at a three-month low.

Firms have cut back on their staffing levels for the third straight month in keeping with cooling business requirements. PMI survey panelists reported that resignations and non-renewal of contracts also contributed towards the latest downtick.

While the rate of job shedding was moderate overall, it was the strongest in 23 months, S&P Global said. With unfinished work recording back-to-back contractions, the latest survey also indicated that a lack of pressure on operating capacity acted as a brake on manufacturing employment.

On the supply-side, the average time taken to deliver inputs lengthened for the third successive month in August, as bad weather was widely attributed to delayed deliveries.

The rate at which lead times lengthened was weaker than in the previous survey period.

Meanwhile, manufacturers expect growth in output in the coming 12 months. Confidence levels rose to a seven-month high, as 60% of survey panelists predict an expansion.

S&P Global said firms were hopeful that improved market conditions and the launch of new products will spur growth in production.

Furthermore, firms were keen to build on their stocks and create buffers in anticipation of greater sales in the months ahead. Pre-production holdings registered a fresh expansion, albeit only a fractional one, while holdings of finished goods were raised for the second straight month and at a rate that was quicker than that seen in July.

Turning to prices, August data signaled further intensification of cost burdens with businesses blaming rising fuel and raw material costs.

The uptick in input prices, however, did not fully materialize through to charges, which were raised at the weakest pace in 33 months amid reports of a competitive market causing some manufacturers to reduce output prices instead.