Inflation put strain on PH manufacturing growth in June
Manufacturing growth in June slightly eased from a month ago as input costs remained elevated despite robust demand for Philippine-made goods, the latest Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI) released Monday showed.
The seasonally adjusted PMI declined to 52.9 last month from 53.7 in May, global research firm IHS Markit said in a report.
A PMI score of above 50 indicates an overall increase in manufacturing activity.
“As the first half of the year concluded, the Philippines’ manufacturing economy continued to recover from the implementation of the TRAIN tax reforms at the start of the year. The latest Nikkei survey showed improving demand conditions at the end of the second quarter,” IHS Markit principal economist Bernard Aw said in a statement, referring to the Tax Reform for Acceleration and Inclusion Act.
Aw earlier blamed the higher excise tax rates slapped across various products under the TRAIN Law for the tempered demand and stunted manufacturing growth at the start of the year.
Signed by President Duterte in December, the TRAIN Law or Republic Act No. 10963 introduced new taxes on cigarettes, sugary drinks, oil products and vehicles, among other goods, which took effect Jan. 1 this year.
“The average PMI reading for the three months to June was noticeably higher than the first-quarter average. However, input cost inflation remained steep, as a combination of domestic and external factors were responsible for the upward pressure,” Aw said.
“The depreciation of the peso, increased taxes, supply shortages, higher global commodity prices, especially for fuel, all contributed to inflation,” Aw added.
The Philippine peso fell to almost 12-year low levels against the US dollar last month.
“As a result, factory gate price hikes remained sharp, which could feed through to consumer inflation in coming months, thereby adding to expectations for further rate hikes [by the Bangko Sentral ng Pilipinas],” according to Aw.
The policy rate now stands at 3.5 percent after the BSP’s policy-setting Monetary Board made adjustments in May and June in response to rising inflation. The headline inflation rate averaged 4.1 percent during the first five months, breaching the government’s full-year target.
