New factory orders fell and output growth cooled in August 2023, based on the latest S&P Global Philippine Purchasing Managers’ Index.
S&P Global said for the first time in two years, the headline PMI—a composite single-figure indicator of manufacturing performance—posted below the neutral 50.0 threshold, indicative of a deterioration in the health of the Filipino manufacturing sector in August.
The sector was weighed down by the fresh contraction in factory orders, which fell for the first time since August 2022, S&P Global said in its September update.
Firms attributed falling order volumes to waning underlying demand conditions, with poor weather conditions also playing a part in hampering inflows of new businesses.
It said while new orders from overseas markets increased in August, the upturn was marginal, and the softest since the current phase of growth began at the start of the year. The rate of output growth also softened to post the weakest expansion in a year, while the latest uptick in buying activity was at a three-month low.
The typhoon season with reported storm damage in July 2023 and the ghost month starting the second half of August 2023 may also have impacted business and other economic activities, including some manufacturing activities, it said.
Manufacturing employment dropped for the third successive month and at the strongest pace in nearly two years, according to S&P Global.
The decline was attributed partly to resignations and non-renewal of contracts, and partly to lack of pressure on operating capacity.
It said that on the supply side, the average time taken to deliver inputs lengthened for the 3rd successive month in August, as bad weather was widely attributed to delayed deliveries.
Manufacturers, however, expect growth in output in the coming 12 months.
Confidence level rose to a 7-month high, as 60 percent of producers and manufacturers predict an expansion. Firms were hopeful that improved market conditions and the launch of new products would spur growth in production.
Companies were also keen to build on their stocks and create buffers in anticipation of greater sales in the months ahead.
The August report signaled further intensification of cost burdens, with businesses blaming rising fuel and raw material costs.