July 14, 2014

BSP survey shows lower PMI

The composite Purchasing Managers Index (PMI) for the manufacturing, services, and retail and wholesale trade sectors was lower at 57.2 in April 2014 from 62.1 in March 2014 and 57.4 in April 2013, based on a survey by the central bank (BSP).

This indicates possible lower growth in these sectors during the month. The BSP traced this to fewer working days during the month due to the observance of the Holy Week which fell in April this year and March last year. It also noted a slowdown in new orders, production, supplier deliveries and inventories even on a slightly higher employment.

The PMI for manufacturing fell to 53.7 in April from 55.7 in March and 56.2 a year ago. The index for services also fell to 59.5 during the month from 66.1 and 58.5 month-ago and year-ago levels, respectively. Meanwhile, the respective numbers for wholesale and retail trade were at 54.3 (April 2014), 57.8 (March 2014) and 54.8 (April 2013).

Our take: The PMI for each sector remained above the 50-point threshold, which still indicated expansion in activity, albeit at a slower pace. However, we note that having the Holy Week during the month have always weighed on economic activity during the period and this usually shows in the volume sales of manufacturing companies and same-store sales growth of retail companies and malls.

This may reflect on the 2Q14 numbers of listed companies in these sectors such as SM Prime (SMPH) and the SM retail firms, Robinsons Land (RLC) and Robinsons Retail Holdings (RRHI), Puregold (PGOLD), Emperador (EMP), LT Group (LTG), Pepsi Cola Products Phils (PIP), Jollibee Foods Corp (JFC), Universal Robina (URC) and D&L Industries (DNL).

The muted activity in the manufacturing industry and retail outlets may also affect the electricity sales of Meralco (MER) and power companies. However, higher temperatures during the season may have also spurred higher electricity usage in other segments to compensate for possible lower sales in the industrial sector.– WealthSec