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The latest Philippines Purchasing Managers’ Index slipped to 52.5 in March from 52.7 in February and marked the softest rate of expansion in seven months
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Still, the headline figure indicated a historically strong improvement in operating conditions driven by further expansion in output and largely underpinned by the strong upturn in new orders
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Port congestion and material shortages further lengthened lead times
The Philippine manufacturing sector in March saw the softest rate of expansion in seven months, according to the latest S&P Global Philippines Manufacturing PMI.
The March Philippines Purchasing Managers’ Index slipped to 52.5 from 52.7 in February, but still above the crucial 50.0 neutral threshold for the 14th consecutive month.
Maryam Baluch, Economist at S&P Global Market Intelligence, said: “The first quarter of 2023 concluded on a solid note, with a further expansion reported across the Filipino manufacturing sector, according to the latest PMI data. Both output and new orders rose at historically strong rates. Consequently, firms raised their buying activity to keep up with the growth in sales. However, operating conditions improved at the slowest pace in seven months, partly due to the softer rise in production and stocks of purchases, and with a second month of job shedding weighing on the headline index.
“Despite a slight slowdown, March data revealed pressures on inflation and supply chains easing. Operating expenses rose at the slowest pace in 27 months, while the incidence of delays was among the weakest since the current sequence of deterioration in vendor performance began in August 2019. Business confidence across the sector remained upbeat, as strong demand conditions buoyed optimism in the outlook for future output.”
Demand remained strong with both production and new orders rising at historically elevated rates.
Driving growth was a further expansion in output, which rose for the seventh consecutive month, largely underpinned by the strong upturn in new orders.
Firms surveyed noted that a stronger demand environment, new projects and a broader clientele helped boost sales. That said, foreign demand increased at a slower pace, with March data indicating only a fractional uptick in new business from abroad and suggesting that domestic demand propelled total new sales growth in the manufacturing sector.
To support growth in new orders and mitigate against future hikes in costs, goods producers raised their purchasing activity in March. However, the pace of growth eased further form January’s recent high as high input prices deterred some goods producers.
Despite a softer rise in input buying, companies were keen to maintain their holdings of raw materials and semi-finished items amid hopes of continued growth in sales, and to protect against longer lead times.
While the incidence of delays at Filipino manufacturers was among the least marked in the current sequence of deterioration in vendor performance which began in August 2019, port congestion and material shortages meant a further lengthening of lead times.
Delivery delays, in part, also resulted in a fresh rise in the levels of unfinished work, marking only the sixth month in the survey history (since January 2016) when backlogs have risen.
Additionally, amid reports of resignations and lay-offs, companies remained hesitant to raise employment. March data pointed to a second successive month of job cuts. That said, the rate of job shedding remained only marginal overall, as strong growth in new orders meant some firms were able to make additional hires.
Filipino manufacturers remained strongly optimistic, with more than a half of the survey respondents predicting growth in output in the year ahead. That said, the degree of confidence was below the historical trend.
