PH manufacturing growth slowed further in July

The growth of Philippine manufacturing activity slowed down in July on declining output and demand, pushing down the country’s S&P Global Purchasing Managers Index to 50.8 points – the slowest growth since January 2022 – from 53.8 in June.

This means the Philippines’ S&P PMI is approaching “neutral” or just holding at current levels, as more than 50 means an overall increase (more positive responses than negative) in manufacturing growth while less than 50 means an overall decrease (more negative answers than positive).

The index is based on a monthly survey of about 400 manufacturers, with responses related to changes compared to the previous month collected in the second half of the current month.

Maryam Baluch, an economist at S&P Global Market Intelligence, said there was a renewed but mild contraction in output and new orders in July, indicating a loss in growth momentum at manufacturers in the Philippines.

Baluch added that even if input buying and demand for materials rose marginally in July, average lead times lengthened as firms noted port congestion, shipment delays and logistical challenges.

Inflationary pressures

“Overall, muted growth across the Philippine manufacturing sector adds caution to the air as inflationary pressures continue to heat up,” she said. Elevated prices had also made manufacturers “unenthusiastic to make purchases.”

Nevertheless, Baluch said that “despite the downside risks to growth arising from greater inflationary pressure, the outlook for the coming 12 months strengthened in July, with firms upbeat and remaining hopeful of a better global economic climate.”

According to S&P Global, survey respondents cited weak client activity in July while higher charges dampened sales.

The company added that regardless of signs of weaker demand, confidence regarding the outlook for output over the coming year strengthened to a seven-month high in July. Still, such sentiment was weaker than the average.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said this was the third consecutive month of decline for the S&P Global Philippines PMI.

Ricafort blamed the latest readout largely on the Russia-Ukraine war that has brought up the cost of factory inputs as well as higher interest rates both locally and abroad.

“Nevertheless, the local manufacturing PMI is still among the fastest since the pandemic started [in] February 2020, thereby still considered one of the bright spots for the economy,” he said.

Ricafort said the continuing growth in the manufacturing sector could bode well for the growth in gross domestic product, about which data for the second quarter will be announced next week. INQ