Factory output dips to 11-month low with boiling inflation

Factory output dips to 11-month low with boiling inflation

Aug 1, 2022, 11:47 AM
Rose De La Cruz

Rose De La Cruz


Manufacturing output slowed to its 11-month this July as demand for goods dropped because of higher prices from manufacturers and lower purchasing power of the peso.

Manufacturing output dipped to its lowest in 11-months last July because of the loss in momentum caused by heating inflation that affected demand for locally- produced goods.

A survey of around 400 manufacturers in the country found that the Philippines’ Purchasing Managers’ Index (PMI), a gauge of manufacturing output, fell to 50.8 in July from 53.8 in June, S&P Global said in a report on Monday.

The latest reading settled slightly above the 50-benchmark separating growth from contraction. Explaining the survey results, S&P said the July PMI “signaled only a minor improvement in the health of the sector,” said a Star report.

S&P cites inflation as culprit

And the culprit was rising inflation. In its report, S&P said demand from both local and international clients softened in July, as rising input costs prompted Filipino manufacturers to raise their selling prices.

Survey data showed average production costs rose to their fastest pace in three months. As a result, stocks of manufactured items grew at a weaker pace last month.

"Overall, muted growth across the Filipino manufacturing sector adds caution to the air as inflationary pressures continue to heat up,” Maryam Baluch, economist at S&P Global Market Intelligence, said in a commentary.

Locally, inflation sizzled to 6.1 percent in June, the hottest in nearly four years, as the country grapples with rallying global energy prices and a weak currency. The Bangko Sentral ng Pilipinas said last week that inflation likely further quickened in July.

S&P said companies were “unenthusiastic to make purchases,” adding that buying activity was “muted throughout July.”

At the same time, manufacturers said they continue to experience logistical challenges due to shipment delays and port congestion.

On a brighter side, S&P said the slump in demand allowed factories to clear their backlogs while raising their workforce numbers. This, in turn, expanded their capacity.

“Despite the downside risks to growth arising from greater inflationary pressure, the outlook for the coming 12 months strengthened in July, with firms upbeat and remaining hopeful of a better global economic climate,” Baluch said.

Tags: #output, #11-monthlow, #risingprices, #decliningdemand

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