Factory output picks up in July: Philippines

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Manufacturing activity in the country expanded at a faster pace in July from the previous month amid improved demand, according to S and P Global Market Intelligence.

In a report released yesterday, S and P Global Market Intelligence said the Philippines' Manufacturing Purchasing Managers' Index (PMI) was at 51.9 in July, up from the 11-month low of 50.9 in June.

The PMI, which is based on a survey of 400 manufacturers, takes into account new orders, output, employment, suppliers' delivery times, and stocks of purchases.

A PMI reading above 50 indicates an overall increase from the previous month, while below 50 denotes a contraction.

S and P Global Market Intelligence economist Maryam Baluch said the latest PMI reading for the country's manufacturing sector shows stronger improvement in operating conditions.

'Continued improvement in the underlying demand picture helped drive the latest upturn, with both production and new orders recording stronger rates of expansion. New export orders also increased during July,' she said.

Philippine manufacturing firms' new export orders accelerated to a three-month high as foreign demand for Filipino goods grew for the seventh successive month.

As demand picked up, manufacturing companies further increased their buying activity.

Manufacturing employment, however, declined for the second successive month, although only marginally.

Despite a slight intensification of price pressures in July, Baluch said rates of both input price and output charge inflation have eased considerably from the highs seen over the last three years.

'The latest data adds to our current forecast that the central bank will abstain from further tightening its monetary policy in the near-term,' she said.

Headline inflation eased to 5.4 percent in June from 6.1 percent in May primarily due to the slower increases in food prices.

After vendor performance improved in May for the first time in nearly four years, July data showed further deterioration with average lead times extended for two consecutive months, the most pronounced extension in seven months.

'If vendor performance further deteriorates, this could pose a headwind for the Filipino manufacturing sector,' Baluch said.

The latest PMI data also showed Philippine manufacturing firms remained optimistic in July with nearly half of survey respondents expecting growth in production in the next 12 months.