The
government released a raft of data last week.
Most
were bad news. Because I’m in a rush, there won’t be lengthy
elaborations
First
the good news.
Personal
remittances surged by 8.7% in July, which lifted year-to-date
growth to 5.9%. Cash remittances posted a 7.1% increase for the same
month and 5% in 7 months.
In
2016, personal remittances accounted for 14% of the Household
Financial Consumption.
Remittances
growth rates continue to drift incrementally lower to reflect on
diminishing returns.
An
uptick in remittances tells a vastly different story from that which
has been propagated by the media and experts.
A
real economic boom will induce more people to stay and work from HOME
than suffer the social cost of being apart from the family.
Next,
merchandise
trade
July
exports rebounded 10.4%.
However,
imports contracted for the second straight month to post a -3.14% in
July. Total July merchandise trade was up by a measly 2.25% yoy.
The
big difference between July’s exports and imports helped reduce the
7-months trade deficit by 4.6% or from US$ 15.4 billion in 2016 to
US$ 14.7 billion in 2017
Imports
are supposed to reflect domestic demand. So what just happened?
And
please do take note that the trend of growth rates of both exports
and imports have been materially slowing down. Exports merely bounced
off from the recent weakness.
Lastly,
the PSA’s industrial
production.
I
talked about the ongoing weakness in the auto sector. I also
discussed the continued softening of the cement industry.
The
overall July industrial production index fell by -2%. Industrial
production has peaked in December 2016 and steadily declined
throughout 2017.
What’s
striking has been the net sales value and volume which plummeted by
-9% and -8% in July.
The
negative net sales and volume seem to presage August’s performance.
Nikkei’s
PMI seems to confirm the PSA’s revelation.
From
the almost always bullish Markit
on the Philippines August Production Index: (bold mine)
After
a subdued start to the third quarter, the Philippines manufacturing
economy lost
further momentum
in August. Growth rates in both output and new orders slowed
noticeably from July and weighed on the PMI.
That led to a
fall in employment levels.
On the price front, peso
depreciation stoked further inflationary pressures.
Encouragingly, business optimism remained elevated.
The
seasonally adjusted Nikkei Philippines Manufacturing Purchasing
Managers’ Index (PMI™) came in at 50.6 in August ─ the
weakest reading in the survey history
─ down from 52.8 in July. The latest reading signalled only a
marginal improvement in the health of the sector, contrasting with
the solid growth seen in the first half of the year.
Signs
of a softening
in demand through the third quarter continued to emerge.
There was a considerable
slowdown in order book growth
to a level well below the historical survey average.
The
weakening was
not limited to domestic markets:
a fall in export sales was also responsible for the slower sales
trend. The decline in new export orders was only the second in the
20-month survey history ─ and ended an 18-month expansion run.
Firms noted that shortages of raw materials led them to turn away
some overseas orders.
Manufacturing
production increased further during August but
at a noticeably slower rate (the weakest on record).
Anecdotal evidence indicated that a lack of raw materials disrupted
production schedules.
August’s
data indicated an ongoing
lack of pressure on capacity
despite lower employment; backlogs of work declined for an eighteenth
month, although the rate of contraction was slower than July.
So
industrial production was BROADLY weaker (sales, export orders,
production, employment and capacity utilization)
in August. And exports will likely drop as well. Employment weakness
can be seen in jobstreet’s manufacturing job openings. Curiously,
credit growth has increased even as manufacturing output has been
turning down. Where has the money been spent?
Interestingly,
“optimism” is being challenged by economics.
Bottom
line: Distort
prices (by monetary inflation), prices get back at you!
The
revenge of economics!
