The Philippines’ manufacturing sector expanded for the 10th month in a row and improved slightly in November, with the S&P Global Philippines Manufacturing PMI (purchasing managers index) inching up to 52.7 in November from 52.6 in October.
This, however, was still slower than the 52.9 recorded in September.
A PMI number of more than 50 means an overall increase in activity (more positive responses than negative) while less than 50 means an overall decrease (more negative answers than positive).
The S&P Global PMI for the Philippines is based on a survey of managers at 400 companies who decide on choosing suppliers and buying supplies of production inputs.
S&P’s PMI is a weighted average of five indices—30 percent based on new orders; 25 percent on output; 20 percent on employment; 15 percent on supplier delivery times; and 10 percent on stock purchases.
S&P Global said such growth in the manufacturing sector occurred amid rising prices, persistent supply chain issues and the weakness of the Philippines peso.
Maryam Baluch, an economist at S&P Global Market Intelligence, said the manufacturing sector improved in November thanks to greater demand conditions that drove higher sales and output.
Baluch said that while the manufacturing sector has shown strong gains in 2022, elevated price pressures pose an ongoing threat. Inflation in the Philippines is expected to further accelerate from 7.7 percent in October. Meanwhile, the peso ended 2021 at 51:$1, but is now trading at between 56 and 57 per US dollar.“Coupled with supply-chain issues, the peso weakening against the dollar adds further fragility,” she said.
Baluch noted that in November, the Bangko Sentral ng Pilipinas raised its policy rate by 0.75 percentage point to 5 percent.
“As the manufacturing sector has heavily relied on demand to help boost growth, the rise in rates, with the prospect of further potential monetary tightening, could impact customer spending,” she said.
“Nonetheless, firms remain strongly upbeat in the outlook for output for the coming 12 months,” she added.
In addition, confidence among manufacturers improved in November, a factor which is often linked to greater client activity, the economy opening up and more firms undertaking new projects.
According to S&P Global, demand remained strong midway through the fourth quarter as output and factory orders grew for the third consecutive month.
Michael Ricafort, chief economist at the Rizal Commercial Banking Corp., said the November readout was the lowest in three months or since 51.2 in August.
“Nevertheless, the local manufacturing gauge is still among the highest since before the pandemic started in 2020 or shortly before the COVID-19 lockdown started,” Ricafort said.
He noted that some manufacturers increased production activities in preparation for the seasonal increase in sales and demand in the fourth quarter of the year, and as the economy reopened further toward greater normalcy.