PH manufacturing weakens for second consecutive month in Jan

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  • The Purchasing Managers’ Index (PMI) for the Philippine manufacturing sector weakened for the second consecutive month in January 2024
  • This signals a slowdown amid weakened demand conditions and a moderation in new orders and output growth
  • The Philippines’ Purchasing Managers’ Index ticked down for the second month running from 51.5 in December 2023 to 50.9 in January 2024
  • S&P Global’s survey suggests a cautious outlook, citing global headwinds and sluggish demand from external markets, notably China

The Philippine manufacturing sector experienced a deceleration in operating conditions at the beginning of 2024, marked by weakened demand conditions and a moderation in new orders and output growth.

S&P Global’s survey revealed that the Philippines Purchasing Managers’ Index (PMI)—a composite indicator of manufacturing performance—declined for the second consecutive month, slipping from 51.5 in December 2023 to 50.9 in January 2024.

Despite extending the growth streak for five consecutive months, the latest reading indicated an expansion that was weaker than the series average, suggesting only marginal overall growth, as highlighted by S&P Global.

Looking ahead, economist Maryam Baluch from S&P Global pointed to global headwinds and sluggish demand from external markets, particularly China, as potential factors likely to exert pressure on the Filipino manufacturing sector.

Baluch added a contrasting perspective, noting that other aspects of the latest PMI data, such as increased buying activity and the accumulation of stocks, suggest that manufacturers anticipate continued growth in the upcoming months. A cooling demand environment—especially from overseas markets—resulted in factory orders rising only slightly in January, marking the weakest pace in the current five-month growth sequence.

Aligned with softer demand conditions, S&P Global reported that manufacturing companies in the Philippines increased their production levels at a historically subdued rate. Additionally, the pace of growth, after easing for the second successive month, reached its lowest point since August 2023.

Despite slower rises in new orders and output, companies procured additional inputs in anticipation of stronger sales in the coming months. Buying activity increased for the second successive month in January, reaching its strongest pace in six months.

The survey results also showed that despite ongoing challenges such as material shortages and port congestion, companies managed to build their stocks of purchases in January. Pre-production inventories rose for the fourth consecutive month, aligning with the survey average pace. Notably, stocks of finished goods increased for the first time in three months, as firms worked through backlogs and adjusted to cooling new order growth.

Turning to employment, after two consecutive months of contraction, staffing levels remained unchanged during the latest survey period. Job shedding was still recorded at some firms due to cost constraints and resignations. However, the situation was partly balanced by some companies being more willing to hire additional staff amid expectations of growth in new orders.

Regarding prices, inflationary pressures were historically muted and softened further at the beginning of the year. S&P Global highlighted that output charges rose at one of the slowest rates since the series began in January 2016.

Looking to the future, firms maintained an overall positive outlook, although confidence eased to a three-month low and registered below the long-run average, S&P Global said.