Slower expansion in July manufacturing activity

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Metro Manila (CNN Philippines, August 2) — Factory production grew at a milder place in July as prevailing restrictions helped dampen domestic demand, a recent survey among manufacturers revealed.

The IHS Markit Philippines Manufacturing Purchasing Managers’ Index (PMI) hit 50.4 during the month, higher than the 50.0 neutral value separating expansion from contraction but lower than June’s 50.8 figure. The “marginal” uptick contrasted with April and May’s declines, it added.

“Virus-related restrictions persisted in the Philippines, which contributed to weak domestic demand, and a general reluctance to spend in July,” said the United Kingdom-based information provider.

Survey participants observed another drop in production levels during the month but only at a “fractionally quicker” rate than in June, said IHS Markit. This came as firms had a hard time securing new orders mainly due to the COVID-19 health crisis and weak demand.

Workforce numbers fell anew in July, factory owners said, with voluntary resignations “often reportedly not replaced” according to IHS Markit. However, some respondents cited lower output levels as a reason behind dwindling employment.

Vendor performance also deteriorated, said the information services company, with manufacturers pointing both to raw material shortages and virus-related restrictions as factors behind “another marked lengthening” of supplier lead times.

Input prices in July were driven by higher raw material costs and the imposition of value added tax to certain goods, said IHS Markit. Larger expenses and the impact of VAT likewise contributed to higher factory-gate prices during the period.

Still, factory owners’ sentiment on output expectations for the 12 months ahead improved to a four-month high, IHS Markit noted.

“The vaccination program often underpinned hopes of a return to normality over the next year,” it said, adding that panelists also cited new product launches and expected recovery in client demand.