Factory activity slows in July

MANILA, Philippines — The country’s factory activity slowed down in July as higher prices and global uncertainties dampened demand for products.

S&P Global Market Intelligence said in a report released yesterday that the country’s purchasing managers’ index (PMI) fell to 50.8 in July from 53.8 in June.

The latest reading remained above the 50-no change threshold, which S&P Global said indicates “only a minor improvement in the health of the sector.”

A reading above 50 means expansion, while a reading below the threshold denotes a contraction.

Maryam Baluch, economist at S&P Global Market Intelligence, said the headline figure of 50.8 in July shows the slowest expansion since January.

With the exception of January, S&P Global said last month’s reading was the weakest in 11 months.

S&P Global said client activity was weak in July as higher charges affected sales.

Amid rising inflation, firms responded to increasing cost of inputs by hiking their prices.

According to S&P Global, average costs rose to a three-month high in July, while output prices climbed to the third sharpest rate on record.

The country’s inflation rate rose to 6.1 percent in June, its highest rate in more than three years, from 5.4 percent in May.

For the first half, inflation averaged 4.4 percent, above the two to four percent target of the Bangko Sentral ng Pilipinas.

S&P Global said demand from overseas also weakened further, given global uncertainties and the ongoing impact of the pandemic.

With business requirements receding and prices going up, S&P Global said firms were not keen to make purchases.

“Buying activity was muted throughout July, with the rate of increase only fractional overall,” it said.

Baluch said firms also faced logistical challenges, shipment delays, and port congestion.

While demand was weak, firms were able to increase their workforce numbers for the third successive month.

“Efforts to expand capacity were successful as backlogs of work continued to decline in July,” S&P Global said, noting the lack of new orders enabled firms to clear their backlogs.

Even as there are signs of weaker demand conditions, firms expect to see demand pick up over the coming year.

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