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Overall growth in the Philippine manufacturing sector remained strong, albeit softer, in February 2023 driven by strong demand
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The Philippine Purchasing Managers’ Index slipped from January’s seven-month high of 53.5 to 52.7 in February
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Supply chain conditions continued to look bleak, with average lead times lengthening to a greater extent in February
Overall growth in the Philippine manufacturing sector remained strong, albeit softer, in February 2023 driven by strong demand.
The Philippine Purchasing Managers’ Index slipped from January’s seven-month high of 53.5 to 52.7 in February, according to the latest survey of S&P Global.
The latest reading signaled the softest improvement in operating conditions in three months but remained above the neutral 50.0 threshold.
“According to the latest PMI data, growth across the Filipino manufacturing sector remained solid midway through the first quarter of 2023, albeit easing slightly from January. Both production levels and factory orders rose at solid rates and were stronger than their respective historical averages,” S&P Global economist Maryam Baluch said in a statement.
Growth remained solid as output and new orders, the two largest contributors to the headline index, expanded further.
New customers and greater client demand helped drive the increase in new sales as many survey panelists reported productions levels returning to pre-pandemic times.
As per anecdotal evidence, greater demand from customers and a growing clientele helped drive the latest upturns.
Greater production requirements meant that firms also raised their purchasing activity, with input buying increasing for the sixth straight month.
Although sharper than the series average, February data signaled a softer rise in acquisitions of raw materials and semi-finished goods.
Similarly, Filipino firms were keen to maintain their stocks in anticipation of greater sales in the months ahead.
Preproduction inventories rose for the eighteenth consecutive month, despite the rate of accumulation easing to a four-month low.
Meanwhile, post-production inventories rose in February following the first decline recorded in a year during January.
However, February data did reveal some areas of concerns. Reflecting a softer rise in output, the seasonally adjusted Employment Index ticked down for the second month running and signaled the first fall in workforce numbers since last November.
Moreover, supply chain conditions continued to look bleak, with average lead times lengthening to a greater extent in February.
Mentions of port congestion, higher volumes of orders and material scarcity all weighed on vendor performance and resulted in a further deterioration.
In terms of prices, after softening in January, February data revealed a further intensification of both input price and output charge inflation. The latest upticks in input costs and output charges, though less pronounced than their respective averages during 2022, were often linked to increases in raw material prices and greater supplier charges.
Looking forward, Filipino manufacturing firms maintained a positive year-ahead outlook for output. In February, half of the survey panelists expected higher output in the coming 12 months. However, sentiment weakened from January, and was below the long-term series average as concerns regarding competition and the rising costs of inputs seeped into expectations.
