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Production levels fell in July amid fresh contractions in new orders
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The S&P Global Philippines Purchasing Managers’ Index dipped to 50.8 in July from 53.8 in June
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Global uncertainties and the pandemic continued to weigh on export demand
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Logistical challenges, shipment delays and port congestion were some of the reasons blamed for delays in lead times
The Philippine manufacturing sector dipped in July amid fresh contractions in new orders.
The S&P Global Philippines Purchasing Managers’ Index (PMI) fell to 50.8 in July from 53.8 in June, signalling a “loss in growth momentum”.
Down from the highs seen in the previous quarter, the respective seasonally adjusted headline figure measured just slightly above the 50.0 no-change mark that separates growth from contraction.
READ: PH manufacturing stays solid in June despite slight easing
“Data from the latest PMI survey indicated a loss in growth momentum at goods producers in the Philippines. Renewed contractions in output and new orders, albeit only mild, were recorded in July. The headline figure slipped to 50.8 in July to signal the slowest expansion since January,” S&P Global Market Intelligence economist Maryam Baluch said.
Client demand from foreign markets weakened further in July. While the pace of decrease was the softest in the current five-month sequence of contraction, S&P Global said global uncertainties and the ongoing impact of the pandemic continued to weigh on export demand.
Moreover, with business requirements receding and prices rising, firms were unenthusiastic to make purchases. Buying activity was muted throughout July, with the rate of increase only fractional overall.
While a slowdown was apparent, firms raised workforce numbers for the third successive month. Efforts to expand capacity were successful as backlogs of work continued to decline in July. The rate of depletion quickened from June, as anecdotal evidence showed a lack of new orders and sufficient capacity allowed firms to clear existing backlogs.
Stocks of purchases increased for the 11th month running in July. However, the rate of accumulation eased with the latest pace of increase the joint-slowest since October last year. Similarly, stocks of manufactured items grew at a weaker pace than previously.
July data also highlighted a further deterioration in vendor performance, as firms noted that lead times lengthened to the greatest extent in four months. Logistical challenges, shipment delays and port congestion were some of the reasons blamed for delays.
Adding further strain on the sector were near-record rates of inflation. Average cost burdens rose sharply in July, as the pace of increase quickened to a three-month high that was only slightly slower than the peaks seen in March and April. Similar was the case for the charges levied by firms in response to the rising input prices, as output prices rose at the third-sharpest rate on record.
Regardless of signs of weaker demand conditions, confidence regarding the outlook for output over the coming year strengthened to a seven-month high in July. Firms stated that stronger expectations were underpinned by hopes of greater customer demand. That said, sentiment was weaker than the series average.
