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Philippine manufacturers performed solidly at the start of the year with sharp upturns in both output and new orders as demand for manufactured goods grew
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The country’s Purchasing Managers’ Index edged up for the third month running to a seven-month high of 53.5 in January 2023 from 53.1 in December 2022
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Growing international client numbers and stronger demand from China helped revive exports for the first time in 11 months
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Supply chain pressures eased further with better infrastructure, more vendors, and the lifting of port restrictions that improved delivery times
The Philippine manufacturing index in January rose to a seven-month high, with sharp upturns noted in both output and new orders as demand for manufactured goods increased.
The S&P Global Philippines Purchasing Managers’ Index (PMI) rose to 53.5 in January 2023 from 53.1 in December 2022. The latest PMI is also up for the third consecutive month.
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Operating conditions improved solidly, and the rate of expansion posted was strong in the context of historical data, S&P Global noted.
An expansion in output was registered for the fifth month running. The pace of growth quickened month on month, signalling a sharp rise in production levels. S&P Global said anecdotal evidence pointed to growing demand for Filipino manufactured goods. Similarly, new orders rose at a faster pace in January.
Additionally, foreign demand for goods manufactured in the Philippines picked up in January.
Growing international client numbers and stronger demand from China helped revive exports for the first time in 11 months.
The latest rise in buying activity reflected the manufacturers’ willingness to meet growing demand. The sector’s rate of expansion was among the fastest on record.
Furthermore, with a sustained rise in client activity, manufacturing companies reported that the levels of unfinished work increased in January – marking only the fifth month of growth in work backlogs since the series began in January 2016.
Stronger demand conditions also led to manufacturers relying on inventories. For the first time in a year, holdings of post-production inventories fell as firms used stocks to meet higher new orders. That said, the pace of destocking was only slight.
Encouragingly, while demand continued to strengthen, it did not lead to operating expenses reheating. Instead, cost pressures moderated further in January.
S&P economist Maryam Baluch said the data suggested that the aggressive monetary stance taken by the US central bank has been effective as further signs of easing price pressures were recorded in January.
“Encouragingly, demand has yet to be impacted negatively by policy changes,” Baluch said.
“Additionally, supply chain pressures also eased further, with [survey] panellists citing that improved infrastructure, more vendors and lifting of port restrictions helped with delivery times,” Baluch added.
While supplier performance continued to worsen in January, average lead times lengthened at the slowest pace since November 2019 as mentions of third-party vendors and relaxed port requirements helped alleviate supply-chain pressures.
However, rising business requirements did not fully translate into a higher intake of workers. Despite reporting a second month of growth, hiring activity across the Filipino manufacturing sector remained weak.
“Overall, strong domestic demand fed into higher optimism for the year ahead. 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,” Baluch said.
