Manufacturing sector records quickest growth in 9 months

Photo by Kiefer Likens on Unsplash
  • Philippine manufacturing conditions saw the fastest improvement in nine months
  • The Philippines’ Purchasing Managers’ Index rose to 52.7 in November from 52.4 in October
  • Strong demand in both domestic and foreign markets, along with new client wins and increased contract work, boosted overall sales and production for firms
  • November data, however, revealed a decrease in purchasing activity for the first time in 15 months

The Philippine manufacturing sector improved at the quickest rate in nine months in November 2023, driven by stronger demand conditions that helped drive quicker expansions in new orders and output.

The S&P Global Philippines’ Purchasing Managers’ Index (PMI) rose from 52.4 in October to 52.7 in November. This marks the strongest showing since February 2023.

The key contributors to this improvement were the top two PMI components—new orders and output—both experiencing growth rates at eight- and 10-month highs, respectively.

Firms attributed this growth to strong demand conditions in domestic and foreign markets, new client acquisitions, and increased contract work, which boosted overall sales and production.

November data, however, revealed a decrease in purchasing activity for the first time in 15 months. Higher prices for raw materials and concerns of overstocking dissuaded input buying at some firms. Some businesses, however, continued to purchase inputs, helping offset the overall downturn.

While stocks of purchases expanded for the second consecutive month, the rate of increase was modest. Manufacturing firms held onto inputs to enhance cost-effectiveness.

November data also indicated a modest reduction in manufacturing employment, marking a fresh contraction following two months of tepid growth. Spare capacity and declining backlogs led some firms to curtail staffing, although a sustained rise in new business encouraged others to increase hiring.

Meanwhile, vendor performance worsened in November, reversing two months of improvements. The rate at which lead times lengthened was moderate overall, with firms citing material shortages and congestion at ports. This translated into some reports of higher material and supplier costs which were largely blamed for the latest rise in cost burdens.

However, with other price pressures remaining muted, the input price inflation rate was the weakest in over three years, resulting in a similarly modest uptick in manufacturers’ selling prices.

Despite challenges, Filipino goods producers maintained optimism, with 46% of respondents predicting an expansion in output in the next 12 months. While an improvement from October, confidence levels remained historically subdued.

READ: PH manufacturing sees quicker expansion in output in Oct