Factory activity further picks up

Despite slower export orders, the manufacturing sector posted faster growth for the second straight month in June.

The latest Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI) released Monday showed the seasonally adjusted PMI further increased to 51.3 in June from 51.2 last May. A PMI score above 50 meant there was an overall increase in manufacturing activity.

“The latest figure signaled a still subdued picture for the manufacturing sector, with the reading among the lowest in the three-and-a-half year history despite being highest seen since March,” global research firm IHS Markit said in a report. The firm compiles the monthly PMI survey data.

“The marginal rise in the headline index was mostly due to a greater expansion in output of Filipino manufacturers. In line with February’s result, the rate of growth was the joint-fastest in 2019 so far,” IHS Markit said. “Anecdotal evidence generally related the increase with higher demand for goods, although it was also driven by firms working through pre-existing orders and raising post- production stocks.”

But IHS Markit economist David Owen noted total new orders have been sluggish of late. In June, new orders from abroad fell the sharpest since 2016 “as a number of firms highlighted a lack of demand.”

“Altogether this suggests that there will be less incentive to raise output in the months ahead, unless firms see a strong inflow of new orders. Many companies may switch to using up their inventories, in which case activity could dry up. Firms also face notable labor market problems, as resignations were once again mentioned by a number of panelists,” Owen said. —BEN O. DE VERA