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The Philippines’ manufacturing index declined to 51.9 in August 2019, down slightly from 52.1 in July 2019, but still one of the highest recorded this year so far, according to the latest Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI).

A reading above 50 indicates an expansion of the manufacturing sector compared to the previous month; below 50 represents a contraction; while 50 indicates no change.

“Latest PMI figures showed that growth in the Philippines manufacturing sector was largely similar in both July and August. While sales growth was down from the previous month, greater hiring activity meant that the headline reading dropped only slightly to 51.9,” said David Owen, an economist at IHS Markit, which compiles the PMI survey.

Latest data revealed slight downward pressure on production growth over the month. Output did increase, but only modestly and at the slowest pace for four months, widely linked by panellists to a softening in the rate of new order growth.

IHS Markit noted, in fact, that the increase in new business was the least marked in 13 months. While sales remained strong overall, some firms were impacted by monsoons as well as a drop in demand from foreign clients.

Adverse weather conditions also led to a slight deterioration in vendor performance, the first recorded since March. Despite this, IHS Markit said manufacturers managed to increase their input stocks for the fourth consecutive month, and at a stronger rate than in July. Purchases continued to expand solidly.

“Some firms noted a slowdown in customer demand due to monsoons during August. This also led to a slight deterioration in supply chain efficiency as lead times increased marginally. Nevertheless, firms were still able to increase stock levels,” Owen said.

He said, however, that “one note of caution from the data was another moderate fall in export demand.” New orders from abroad have now fallen in ten out of the last 12 months, as trading conditions in the region remain difficult due to the US-China trade war.

“The economy is subsequently relying on strong domestic sales to stop growth from falling any further,” Owen noted.

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