Economy · August 2, 2022

PH PMI down to 50.8 in July – S&P

FINANCIAL information and analysis firm S&P Global said the Philippine Manufacturing Purchasing Managers Index fell from 53.8 in June to 50.8 in July.

Operating conditions improved in July in the Philippine manufacturing sector. However, the growth rate was only contained and, except for the stagnation in January, it was the weakest in the past 11 months.

The main factors behind the lower figure have been the recent contractions observed in both production levels and inflows of new business. Respondents said customer activity was weak in July, with higher charges hampering sales. Although they revealed a much weaker improvement in operating conditions, companies continued to hope for an increase in production over the next 12 months.

The data also revealed that July customer demand from overseas markets further weakened. Although the pace of decline has been the weakest in the current five-month downturn sequence, global uncertainties and the continuing impact of the pandemic have continued to weigh on export demand.

With business needs dwindling and prices rising, businesses weren’t thrilled to make purchases. Purchasing activity was weak throughout the month of July, with an overall only fractional rate of increase.

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While a slowdown is imminent, companies have increased their workforce numbers for the third consecutive month. Efforts to expand capacity were successful as backlogs continued to decline in production and new orders fell in July.

The exhaustion rate has also accelerated since June, as anecdotal evidence indicated that a lack of new orders and sufficient capacity allowed companies to clear existing arrears.

There has also been a deterioration in supplier performance, as companies have noticed that delivery times have lengthened to the greatest extent in four months. Logistical challenges, shipping delays and port congestion were the causes cited as the reason for the delays.

Adding further tension to the sector was the near-record inflation rate. Average cost burdens increased significantly in July as the pace of increase accelerated to a three-month high. They were only slightly slower than the peaks seen in March and April. It was similar for the charges levied by firms in response to rising input prices, as output prices rose to the third highest rate on record.

Despite signs of worsening demand conditions, confidence in the outlook for production for next year strengthened, reaching a seven-month high in July. Firms said stronger expectations were outweighed by hopes of increased customer demand.