PH manufacturing expands for third straight month

The Philippine manufacturing sector expanded faster than the previous month for the third time in a row with the S&P Global Philippines Manufacturing PMI (purchasing managers index) hitting a seven-month high of 53.5 in January from 53.3 in December.

S&P Global said in its latest month update that, unfortunately, the rev up in business needs did not fully translate into a higher intake of workers.

Hiring activity across the manufacturing sector in the Philippines remained weak as layoffs and resignations offset job creation.

S&P Global said the January result showed strong gains kicking off the year as businesses raised their output levels and sharply bumped up their buying activity, complemented by a “strong and accelerated upturn in new orders.”

Since February 2022, the Philippine PMI has been above the neutral 50 for the 12th month in a row.

PMI’s significance

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).

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.

Maryam Baluch, an economist at S&P Global Market Intelligence, said operating conditions across the sector improved solidly in January as respondents cited increased demand for Filipino manufactured goods.

Factory output alone saw an expansion the fifth straight month running as anecdotal evidence pointed to increasing demand for Filipino products.

Overseas need for goods made in the Philippines also increased in January, thanks mainly to a growing number of international buyers as well as a greater demand from China.

According to S&P Global, these factors helped revive Philippine exports for the first time in 11 months.

“The data also suggested that the aggressive monetary stance taken by the [Bangko Sentral ng Pilipinas] has been effective as further signs of easing price pressures were recorded in January,” Baluch said.

No interest rate impact

She added that rising interest rates has not yet shown a negative impact on demand for Philippine manufactured goods.

“Additionally supply chain pressures also eased further, with panelists citing that improved infrastructure, more vendors and lifting of port restrictions helped with delivery times,” Baluch said.

“Overall, strong domestic demand fed into higher optimism for the year ahead,” she added. “Moreover, the lack of COVID restrictions, greater investment in new products and undertaking new projects aided hopes of a prosperous year for the Filipino manufacturing sector.”

This, in turn, resulted in higher levels of optimism among survey respondents with confidence improving from a four-month low in December to a level that is better than historical average.

Among respondents, about two-thirds anticipate greater output in the coming 12 months while only one percent expressed a contrary outlook. INQ