Local manufacturing firms registered growth for the seventh month running in August, improving from the six-month low seen in the previous month as output stabilized and a softer contraction in new orders was reported.

The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) rose to 51.2 last month from 50.8 percent in July. The headline figure was above 50.0 no-change threshold that separates growth from contraction.

"August PMI data signalled an improvement in operating conditions across the Philippines manufacturing sector. Encouragingly, employment increased strongly and at the sharpest pace since mid-2017,” Maryam Baluch, S&P Global Market Intelligence, economist said.

August data showed some relief as the seasonally adjusted Output Index stabilized after contracting for the first time in six months in July.

Moreover, the rate of contraction in new orders softened in the latest survey period, with firms reporting only a marginal decrease in client demand overall.

“Total sales were weighed down by a sharper decrease in new export orders, however, as foreign customer demand fell at the steepest rate since January,” S&P Global said.

On the employment front, strong gains in workforce numbers helped boost the latest headline PMI figure during August.

“Firms hired additional staff for the fourth consecutive month as firms hoped for expansion in production in the coming months. Additionally, the rate of job creation was the fastest since June 2017,” S&P Global said.

That said, lower new order inflows led to firms cutting back on purchasing activity last month. While the rate of contraction was only mild, it marked the first reduction in input buying since January.

Despite increasing for a year, stocks of raw materials and semi-finished items rose at the softest pace since October last year, with the rate of increase easing for the fourth month running.

“Growth in post-production inventories showed a similar story, as stocks rose at the weakest pace in the current run of accumulation that began in February. The softer increases in inventories reflected weak client demand,” S&P Global said.

Meanwhile, supply-chain disruptions intensified in August, with lead times lengthening to the greatest extent in five months. Shipment delays and port congestion were predominately cited by respondents as the main causes of delivery delays.

Supply-side disturbances along with rising energy and material prices, exerted upward pressure on operating expenses in August.

As a result, purchasing costs have now risen in each month since May 2020. Firms reported a rapid increase in input prices that was among the sharpest on record, albeit softer than that seen in July.

In line with rising average cost burdens, firms increased their factory gate charges further in August, thereby extending the current sequence of selling price inflation that began in May 2020. Moreover, the rate of charge inflation was the quickest in five months.

Lastly, sentiment across manufacturing firms in the Philippines remained strongly positive during August with around half of survey respondents hopeful of an expansion in output in the coming 12-months.

However, the degree of confidence posted second-lowest in seven months and was subdued in the context of the series history.