PH manufacturing showed steady gains on increased orders in August

The Philippine manufacturing sector continued its expansion in August 2024, driven by increased new orders, according to the latest purchasing managers’ index (PMI) from S&P Global Market.

The headline S&P Global Philippines Manufacturing PMI, a composite indicator of manufacturing performance, remained unchanged at 51.2 in August. An index above the neutral 50.0 suggests ongoing growth in the sector.

Filipino manufacturers expressed optimism about future expansion, with the respective index well above the neutral 50.0 mark. S&P Global noted that the sector has strengthened for a year, albeit with a modest improvement in the latest data.

“The Filipino manufacturing sector showed sustained and modest gains midway through the third quarter. Growth in output and new orders accelerated on the month, thereby highlighting improving demand trends. However, employment fell, and buying activity cooled, suggesting that manufacturers remain cautious about growth prospects,” said S&P Global Market economist Maryam Baluch.

“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 said.

Confidence levels among manufacturers declined in the latest survey period, reaching a four-month low. This indicates that expectations for future production may have softened.

Overall, new orders increased, despite a fall in international sales. Companies raised their production levels, with the rate of increase nearly matching the long-run average.

Underlying data signaled improved demand trends, with Filipino goods producers recording the strongest uptick in new orders in three months. However, demand from foreign customers faltered in August, with new export sales falling for the first time since the start of the year.

Domestic demand drove overall growth in new orders, supporting a stronger uptick in output. The rate of growth quickened from July’s four-month low and was broadly in line with the historical series average.

S&P Global said the growth in business requirements led firms to increase purchasing in August, but the rate of increase softened to a five-month low and was modest overall.

The slowdown in buying activity was reflected in a softer build-up of pre-production inventories held at manufacturers. The upturn was slight and the weakest in the six-month period of accumulation. Postproduction inventories were depleted in August, the first downtick noted since February followed five consecutive months of stock building.

The employment uptick seen in July was reversed in August. S&P Global said that the tenacity of goods producers to complete workloads efficiently, despite a contraction in workforce numbers, highlighted sufficient capacity.

“Encouragingly, inflationary pressures were curbed further,” the report said. Input costs rose moderately, while selling prices for goods were raised at a softer and only a slight pace, indicating that firms are absorbing some costs to boost sales and remain competitive.

Companies also registered a further lengthening of lead times for inputs received from suppliers. Vendor performance deteriorated for a fourth straight month, but the latest incidence of delays was the least pronounced since May.