Manufacturing growth still slowing down

Manufacturing growth in February was the slowest in six months as mostly domestic orders eased despite export recovery that month, the latest Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI) released on Friday showed.

The seasonally adjusted PMI further declined to 51.9 last month from 52.3 in January, making it three consecutive months of slowing growth.

Since the February PMI score remained above 50, it meant there was an overall increase in manufacturing activity.

However, it was the lowest PMI since the 50.6 posted in August last year.

“Weaker new business growth led to a lower headline PMI in February. That said, the survey also pointed to an increase in export orders for the first time since August, suggesting that softer demand signals were predominantly from the domestic market,” IHS Markit economist David Owen said in a statement.

IHS Markit, which compiles the PMI survey data, said that new orders—both from the domestic and export markets—registered the softest increase in seven months last February.

“There is little cause for concern though, with the PMI having been relatively strong over the last few months,” Owen said.

“With inflation falling and employment strong, manufacturers will likely see improved business conditions ahead,” he added.

On Thursday, the Bangko Sentral ng Pilipinas said inflation in February likely settled within the range of 3.7-4.5 percent amid stable rice prices and a stronger peso.

Headline inflation last January fell to 4.4 percent year-on-year, the lowest in 10 months, after the rate of increase in prices of basic commodities last year averaged at a 10-year high of 5.2 percent due to domestic food supply bottlenecks, skyrocketing global oil prices and higher excise taxes slapped on consumption.

Former Economic Planning Secretary Cielito Habito had attributed much of the good news in the economy in recent years, especially the more job-creating and poverty-reducing nature of our gross domestic product growth, to the surging manufacturing sector.

He noted that during the last five years and until earlier last year, the industry sector had grown faster than agriculture and services did. Services had consistently been the fastest-growing sector and the economy’s pace-setter in the past. This changed when import tariffs across the Association of Southeast Asian Nations (Asean) went down to zero in 2010, helping induce a surge in various manufactured exports to neighboring countries as regional value chains expanded and flourished. The Philippine, he said, moved beyond to global value chains as well, including in the aerospace industries, with companies producing vital parts for major aircraft.