- The Philippine manufacturing sector rose to a six-month high in December, extending the sequence of improving operating conditions that began in February
- Edging up for the second consecutive month, the headline index rose from 52.7 in November to 53.1 in December, according to the latest S&P Global Philippines Manufacturing PMI
- Recovery of the manufacturing sector is aided by the release of pent-up demand because of the COVID pandemic
- Production and new orders expanded for the fourth consecutive month, albeit the latter increasing at a slightly softer rate
- Concerns that could threaten growth prospects in 2023 include challenges in the form of supply-chain disruption and inflationary pressures
The Philippine manufacturing sector rose to a six-month high in December, extending the sequence of improving operating conditions that began in February, according to the latest S&P Global Philippines Manufacturing PMI (purchasing managers’ index).
Edging up for the second consecutive month, the headline index rose from 52.7 in November to 53.1 in December, above the 50.0 no-change mark that separates growth from contraction.
“The latest PMI data signalled sustained growth across the Filipino manufacturing sector. The release of pent-up demand because of the COVID pandemic continued to help the recovery of the manufacturing sector this year. Furthermore, the latest upturns in output and new orders were stronger than the survey averages. December data also revealed growth in employment after a solid fall in workforce numbers was reported in November,” said Maryam Baluch, Economist at S&P Global Market Intelligence.
Still, there are ongoing concerns that could threaten growth prospects in 2023, including challenges in the form of supply-chain disruption and inflationary pressures, she said.
“While the central bank of Philippines has taken measures to curb inflation, global supply chain delays and material shortages remain a much more complex issue to solve. Nonetheless, goods producers remain strongly upbeat for the year-ahead, banking largely on domestic demand to help maintain growth,” Baluch added.
Both production and new orders expanded for the fourth consecutive month, albeit the latter increasing at a slightly softer rate.
Firms remained optimistic in the outlook for output for 2023, although the degree of confidence weakened to a four-month low in December with rising market competition and inflation dampening expectations.
The rate of growth in production levels quickened in December, indicating the fastest rise in output levels since June.
Firms resumed hiring in December due to increasing business requirements, following the first fall in headcounts in eight months during November. While the return to growth is an indication of improvement across the Philippine manufacturing sector, the rate of job creation was only fractional overall.
Growth in new orders entered its fourth successive month, as demand conditions remained strong for Philippine-manufactured goods. Behind the latest upturn in incoming new business is domestic demand; foreign orders contracted for the tenth month in a row.
Price pressures moderated, S&P said. Inflationary pressures remained historically elevated in December. However, rates of both input price and output charge inflation softened, with selling prices rising at the slowest pace in a year.
The pace of increase in cost burdens was the slowest for three months, while firms raised their selling prices at the softest rate for a year in December amid efforts to drive sales.
Firms became more cautious in their input buying during December. Adjusted for seasonality, the respective index ticked down from November’s six-month high, indicating only a slight increase in the quantity of inputs purchased.
Simultaneously, holdings of pre-production inventories increased at a softer pace in December month-on-month.
In addition, the accumulation of post-production inventories was the joint weakest in the 20 current 11-month sequence of expansion, suggesting firms were more inclined to rely on inventories to meet demand.
