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August has been another growth month for Filipino manufacturing firms, their seventh month of expansion this year across the sector
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The S&P Global Philippines Purchasing Managers’ Index improved marginally from 50.8 in July to 51.2 in August
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The sector, however, faces challenges from growing downside risks
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Supply chain disruptions, weakening of the peso and a high interest rate environment will squeeze demand as clients’ disposable income will take a hit
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Supply-chain disruptions intensified in August, with lead times lengthening to the greatest extent in five months
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Sentiment remained strongly positive across Philippine manufacturing companies in August with around half of survey respondents hopeful that output will grow in next 12 months
Philippine manufacturing signaled growth for the seventh month running in August 2022, although the sector faces challenges ahead.
The S&P Global Philippines Purchasing Managers’ Index improved from 50.8 in July to 51.2 in August, staying above the 50.0 no-change mark that separates growth from contraction since February, according to the latest survey of S&P Global.
The PH manufacturing growth in August was weaker than the series average, S&P Global noted, adding “…growing downside risks to growth challenge the sector,” S&P Global economist Maryam Baluch said in a statement.
“Already we have seen output failing to expand during the latest survey period, and factory orders falling for the second consecutive month. Furthermore, price pressures remained persistently high,” Baluch added.
She noted that headwinds are heightening concerns that inflationary pressures, supply chain disruptions, the weakening of the peso and a high interest rate environment, with further hikes expected, will squeeze demand as clients’ disposable income will take a hit.
Supply-chain disruptions intensified during August, with lead times lengthening to the greatest extent in five months. Shipment delays and port congestion were predominantly cited by respondents as the main causes of delivery delays.
Supply-side disturbances, along with rising energy and material prices, exerted upward pressure on operating expenses in August.
As a result, purchasing costs have now risen in each month since May 2020. Firms reported a rapid increase in input prices that was among the sharpest on record, albeit softer than that seen in July, S&P Global said.
READ: PH manufacturing dips in July amid contraction in new orders
In line with rising average cost burdens, firms increased their factory gate charges further in August, thereby extending the current sequence of selling price inflation that began in May 2020. Moreover, the rate of charge inflation was the quickest in five months.
S&P Global said sentiment across PH manufacturing firms remained strongly positive in August with about half of survey respondents hopeful of an output expansion in the next 12 months.
The degree of confidence, however, was the second-lowest in seven months and was subdued in the context of the series history.
