Philippine manufacturing sector revving up on rising customer demand

The local manufacturing sector improved for the third straight month, with the S&P Global Philippines Manufacturing PMI (purchasing managers index), reaching 52.9 in September and buoyed by customer demand.

This is the highest reading since 53.8 in June, which fell to 50.8 in July but bumped up to 51.2 in August.

Based on a survey of managers at 400 companies who decide on choosing suppliers and buying supplies of production inputs, a PMI number of more than 50 means an overall increase (more positive responses than negative) while less than 50 means an overall decrease (more negative answers than positive).

Maryam Baluch, an economist at S&P Global Market Intelligence, said companies noted that an increase in customer demand allowed production levels and factory orders to grow for the first time since June.

Baluch said inflationary pressures, which have been “uncomfortably high” in the past couple of months, also moderated in the latest survey period, hinting that inflation in the Philippines may have peaked.

The Philippine Statistics Authority will announce inflation numbers for September on Oct. 5. This was pegged at 6.3 percent in August, but the inflation-herder Bangko Sentral ng Pilipinas believes the September readout settled within the range of 6.6 percent to 7.4 percent.

“That said, inflation rates remained sharp and could still be harmful to demand conditions, with firms citing rising material and energy prices, alongside an unfavorable exchange rate, which could place upward pressure on costs,” Baluch said.

“Moreover, widespread supply-chain issues continue to hamper production,” she added. “Overall, sustained growth across the sector has meant that firms are largely optimistic in regards to expansion in output in the future.”

According to S&P Global, the latest survey revealed that business confidence across manufacturing firms reached the strongest in just over four years, a 49-month best.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., noted that the S&P Global Philippines PMI number has been above 50 for the eighth straight month and was also at its highest since the pandemic started in 2020.

Ricafort attributed the latest improvement to some manufacturers seasonally increasing production activities in preparation for the equally seasonal fourth-quarter peak in sales and demand, especially since the Philippine economy has reopened further toward greater normalcy.

And yet, he said the September PMI number was still lower than the prepandemic high of 54.3 posted in April 2019.

—Ronnel W. Domingo INQ