PH manufacturing growth steady in August — S&P Global

The Philippine manufacturing sector expanded anew in August, albeit at the same rate in July and posting only modest improvement, results of the latest survey conducted by S&P Global released on Monday showed.

The headline S&P Global Philippines Manufacturing PMI stood at 51.2 in August. A reading above the 50.0 threshold indicates an expansion, while levels below indicate a contraction.

“The Filipino manufacturing sector showed sustained and modest gains midway through the third quarter. Growth in output and new orders accelerated in the month, thereby highlighting improving demand trends,” S&P Global Market Intelligence economist Maryam Baluch said in a dispatch.

This comes as Filipino manufacturers reported the strongest uptick in new orders in three month, but demand from foreign clients declined as new export sales declined for the first time in 2024, indicating that demand was domestically driven.

Firms also decided to increase purchasing during the month, but growth was the lowest in five months. This was reflected in the slower buildup of pre-production inventories, while post-production inventories were depleted.

“(E)mployment fell, and buying activity cooled, suggesting that manufacturers remain cautious about growth prospects,” Baluch said.

“Confidence levels also waned in the latest survey period and hit a four-month low, further confirming that expectations surrounding the production outlook have softened,” she added.

The survey found that inflationary pressures were curbed further in August, with input costs up moderately while selling prices were raised at a softer and slight pace.

Firms also recorded longer lead times for inputs, with vendor performance down for the fourth straight month.

Moving forward, Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort said that with the downtrend of inflation, this could prompt the central bank to continue with its policy easing which could drive manufacturing growth.

“For the coming months, easing headline inflation trend towards the central bank targets would support/justify local policy rate cuts later in 2024, especially if the Fed starts cutting rates later this year until 2026, based on market estimates, thereby could reduce borrowing/financing costs and could support some pick up/recovery in investments as well as in manufacturing/production activities locally and globally,” he said in a separate commentary.

Inflation clocked in at 4.4% print in July, the fastest in nine months, and above the government’s target range of 2.0% to 4.0%, mainly due to faster increase in the prices of housing, water, electricity, gas, and other fuels.

The Monetary Board of the BSP earlier this month cut policy rates by 25 basis points, the first cut in nearly four years, and the first adjustment since the off-cycle hike in October 2023.

Official government data on manufacturing under the Monthly Integrated Survey of Selected Industries (MISSI) is scheduled to be released on October 8, 2024. — RSJ, GMA Integrated News