FILIPINO manufacturers saw business conditions improve last month as sales grew significantly, an IHS Markit survey has found.
Results of the poll released on Thursday showed that the seasonally adjusted manufacturing Purchasing Managers’ Index (PMI) rose to 52.1 in July from 51.3 the month before.
This signaled a “moderate improvement in the health of the sector that was the strongest seen since the start of the year,” IHS Markit said, noting, however, that it was still weaker than the average recorded in the survey’s history so far.
The PMI is a composite index that represents the weighted average of new orders, output, employment, suppliers’ delivery time, and stocks. Readings above 50 signal an expansion; below that; a contraction.
According to IHS Markit, the increase in new orders contributed to the growth upturn in July, with companies reporting higher demand for manufactured goods and some attributing the growth to new projects and the higher spending power of customers.
“New order growth was up notably in July, easing some worries in recent months that the manufacturing environment was facing a slowdown,” IHS Markit economist David Owen said.
“Output, meanwhile, increased at a solid rate, albeit one that was weaker-than-average for the Filipino goods-producing sector,” he added.
The results, however, also showed that the increase in demand was largely domestic, as new export orders fell for the second consecutive month, albeit at a slightly softer rate than in June.
A number of firms blamed the decline on the lack of orders from foreign clients.
Production of Filipino goods manufacturers also “increased solidly” during the month, but the rate of expansion was still softer than in June.
Employment in manufacturing increased for the first time since February, as companies opted to expand their workforce to meet higher output requirements.
A number of firms, however, reported a reduction in employment due to resignations and decreased hiring activity.
On prices, IHS Markit said only 3 percent of respondents reported an increase due to stronger sales and increased costs. It added that, while some firms reported higher cost of raw materials, the improved peso-dollar exchange rate helped ease cost burdens.
“Despite the sudden uplift in demand, price pressures appeared unaffected. Input prices rose at only a modest pace, with an improvement in the exchange rate with the US dollar helping to ease the impact of higher raw material prices. This fed through into the softest increase in selling prices at manufacturers since June 2017,” Owen said.
“Overall, this should help to maintain strong sales growth if demand conditions remain elevated,” he added.
IHS Markit noted that, as output and sales growth continued to be strong during the month, manufacturing firms remained optimistic about future activity, with new products and company development underpinning the outlook.