Manufacturing expands at slower pace in July

MANILA, Philippines —  Philippine manufacturing activity expanded at a slightly weaker pace in July partly due to disruptions brought about by Super Typhoon Carina.

In a statement yesterday, S&P Global said the Philippines’ purchasing managers’ index (PMI)  for manufacturing was at 51.2 in July, slightly lower than the 51.3 reading in June.

The latest PMI reading is the weakest since March.

Derived from a survey of around 400 manufacturers, the PMI is the weighted average of the following: new orders, output, employment, suppliers’ delivery times and stocks of purchases.

A PMI reading above 50 means there was an overall increase compared to the previous month, while below 50 indicates a decline.

“The second half of the year started modestly, with the Filipino manufacturing sector signalling further upticks in output and new orders. Though in both cases, the rates of increase were weaker than their respective long-run averages, thereby indicating relatively subdued growth across the sector,” S&P Global Market Intelligence economist Maryam Baluch said.

Rizal Commercial Banking Corp. chief economist Michael Ricafort attributed the slight decline in manufacturing activity growth “to Typhoon Carina-related disruptions on manufacturing and other business or economic activities in Metro Manila and nearby regions or provinces with large manufacturing or industrial facilities.”

He said the slight decline may also be due to the relatively higher prices or inflation since 2022 and the US dollar or peso exchange rate that led to higher cost of imported inputs for manufacturers.

High interest rates that increased borrowing costs also hampered manufacturing activities.

Baluch said the historically muted inflationary environment may lead to policy rate cuts.

Inflation slowed to its lowest level in four months to 3.7 percent in June from 3.9 percent in May.

In the first semester, inflation averaged 3.5 percent.

Last June, the Bangko Sentral ng Pilipinas maintained the benchmark interest rate at 6.5 percent, a 17-year high.

Baluch said easing financial conditions are expected to solidify the manufacturing sector’s growth in the coming months.

“Moreover, sustained expansions in purchasing activity and the renewed uptick in workforce numbers, indicate that goods producers are likely banking on the strengthening of demand conditions in the coming months,” she said.

S&P Global said manufacturing companies in the country expect output to pick up in the next 12 months.