WEAK manufacturing sales growth in October is serving to fortify the case for further monetary policy easing because of the signals it is giving off of a limited rebound, Pantheon Macroeconomics said.
In a note dated Dec. 10, Pantheon Macroeconomics chief emerging Asia economist Miguel Chanco and Asia economist Meekita Gupta said a robust gross domestic product (GDP) rebound is now seen as less likely after growth in the volume of net sales index for manufacturing fell to -0.01% from 2.9% in September and 0.2% a year earlier.
“It’s early days in terms of hard numbers for (the fourth quarter), but this result suggests strongly that GDP growth will struggle to muster any bounce from (the third quarter’s) grim 4% pace,” they said.
The third quarter reading was the weakest in over four years, easing from 5.5% during the previous quarter and 5.2% a year earlier.
GDP growth averaged 5% in the nine-month period, leading economic managers to concede that the government’s 5.5%-6.5% growth target for 2025 is now out of reach.
“The ongoing slump in sales underscores the limitations of still-rapid consumer credit growth in fueling spending — on aggregate — as household loans ex-property remain a small share of GDP, at about 6.5%,” they said.
Mr. Chanco and Ms. Gupta said the signals being sent out by manufacturing could prompt additional interest rate cuts by the Bangko Sentral ng Pilipinas (BSP).
The Monetary Board delivered its fifth straight 25-basis-point (bp) policy rate cut on Thursday, bringing it the lowest level in over three years at 4.5%. It has so far lowered benchmark borrowing costs by 200 bps since August 2024.
Pantheon Macroeconomics expects the Monetary Board to end its current easing cycle once it reaches a terminal rate of 4.25%.
Mr. Chanco and Ms. Gupta likewise noted that overseas Filipino worker remittances have maintained steady growth but are providing limited impulse in boosting manufacturing.
“Remittances, while continuing to hold steady in terms of growth on a dollar basis, are still not rising fast enough in peso terms to provide any meaningful support to headline sales growth,” they said.
They added that remittances would have to post double-digit growth to reflect in the manufacturing data.
In September, cash remittances rose 3.7%, the strongest in five months, to $3.12 billion.
Cash remittances in the first nine months came in at $28.97 billion, up 3.2% from a year earlier. — Katherine K. Chan
