The country’s manufacturing index or the PMI proved little changed in August, to 50.8 during the month from a three-month high of 50.9 in July, indicating continued growth in the sector closely watched by the Bangko Sentral ng Pilipinas (BSP) as one of a number of guides for monetary policy crafting.
This development strengthens the case for the monetary authorities to keep a keen eye on so-called soft data that would help them decide whether or not there is still room left for another policy rate cut that would also ensure the economy continues to expand this year as projected.
“The data that we get from now on and the soft data that we look at . . . if we see that as weakening considerably, we would probably cut the policy rate further,” BSP governor Eli Remolona Jr. said just last week when the rate-setting monetary board cut another 25 basis points off the policy rate.
According to Remolona, the soft data that tends to suggest weaker output growth are the so-called sentiment data known among policymakers as ISM data derived by the Institute for Supply Management.
He said the Philippines also conducts surveys that tell whether companies are making new orders, taking on more stock, and employing people to deliver them – all of which helps tell whether local output expansion, measured as the gross domestic product (GDP), will be weaker or stronger.
Deputy BSP governor Zeno Abenoja said the PMI in June and July declined by 15 basis points, prompting the authorities to look at the numbers and assess whether such warrant an appropriate policy response.
Remolona earlier acknowledged that the economy has entered a state where price pressures, as measured by inflation, is such that it encourages continued economic expansion.
This has been referred to earlier as the Goldilocks rate.
Remolona said the cumulative impact of the policy rate cuts adopted since August last year should be enough for the economy to post an expansion averaging more or less 5.5 percent this year.
“The cumulative effect of that should be significant enough to strengthen growth,” he said.
