Muted demand keeps PH factory activity in check

Philippine factory activity stalled in August following a “modest” rise in demand amid lingering global headwinds, keeping Filipino producers cautious.
A survey of around 400 companies showed the Philippines’ Purchasing Managers’ Index (PMI), a measure of the manufacturing sector’s health, at 50.8, barely changed from July’s 50.9, S&P Global reported on Monday.
While still above the 50-level separating growth from contraction, the August reading was “historically subdued and only marginal overall.” Maryam Baluch, economist at S&P Global, blamed the muted rise in demand.
“The latest PMI data for the Philippines manufacturing sector once again indicated a subdued performance, with growth rates for output and new orders remaining below their historical averages,” Baluch said.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., noted some uncertainties that bothered Filipino manufacturers amid higher US tariffs on its trading partners beginning Aug. 1. But he noted the seasonal boost from pre-Christmas demand helped offset these concerns.
Survey data showed output rose for the third consecutive month in August at the fastest rate in four months. Companies credited new customer acquisitions and “improved underlying demand trends.”
Foreign demand also strengthened, rising to a seven-month high. To meet new orders, companies tapped into inventories, even releasing stocks from warehouses to avoid rain damage.
Still, factories snapped two straight months of hiring activity. S&P said a combo of rising production requirements and stagnant employment resulted in a further build-up of backlogs, with the rate of accumulation the fastest in six months.
Lastly, Filipino producers sought to soften the impact of higher US tariffs by keeping their selling prices “competitive.”
“Overall, sentiment in the year-ahead outlook remained optimistic and even strengthened compared to the previous month, confidence fell short of the long-run average,” Baluch said.
“However, subdued cost pressures, coupled with manufacturers’ efforts to control their pricing in a bid to remain competitive, could provide the boost firms need to regain sales momentum,” she added.