The Philippine manufacturing sector contracted in September due to weak demand and lower output amid weather disruptions.
In a statement yesterday, S and P Global said the Philippines’ manufacturing purchasing managers’ index (PMI) dipped to 49.9 in September from 50.8 in August.
This is the first time the PMI reading fell below the 50 no-change threshold after being in expansion mode since April.
A PMI reading of over 50 indicates an increase from the previous month, while below 50 denotes a decline.
Generated from a survey of around 400 manufacturers, the PMI covers the following: new orders, output, employment, suppliers’ delivery times and stocks of purchases.
S and P Global Market Intelligence senior economist David Owen said the PMI reading at the end of the third quarter is highly unusual in the sector’s post-pandemic history.
‘New orders and output decreased slightly as firms mentioned a fall in client numbers and a modest drop in production from the suspension of rice imports,’ he said.
While new orders dipped slightly, S and P Global said orders from foreign clients continued to improve, suggesting that the weak demand is mainly from the domestic market.
Poor weather conditions also affected manufacturing firms’ output.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said in an email that the series of storms and floods that hit the country reduced working days for some manufacturers.
He said the ghost month and the tariffs imposed by the United States also led some manufacturers to take a more cautious stance.
The US tariffs on goods entering the US took effect on Aug. 7.
Despite the dip in orders, S and P Global said manufacturers continued to increase their purchases of raw materials.
While input costs went up, manufacturers only implemented marginal increases in selling prices.
‘With overall sentiment in the year-ahead remaining upbeat in September and purchasing quantities increasing, manufacturers appear hopeful that the dip in sector performance is temporary,’ Owen said.
S and P Global said manufacturers are optimistic of posting improved sales and higher output in the next 12 months.