Factory activity growth slows in December in Philippines

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The manufacturing sector in December registered its weakest growth in three months as demand softened.

In a statement yesterday, S and P Global said the Philippines' manufacturing purchasing managers' index (PMI) declined to 51.5 in December from November's 52.7.

While the latest PMI reading remained in expansion mode, S and P Global said it indicated a modest improvement in operating conditions and was the weakest in three months.

The PMI, a gauge of manufacturing performance, is based on a survey of around 400 manufacturers. It takes into account new orders, output, employment, suppliers' delivery times and stocks of purchases.

'The year concluded with yet another expansion across the Filipino manufacturing sector. Output and new orders continued to rise, although at softer rates,' S and P Global Market Intelligence economist Maryam Baluch said.

Growth in new orders was the lowest in four months, while export volumes dipped for the first time in three months due to weaker demand from overseas.

Manufacturing output also expanded at its slowest pace in three months.

In anticipation of an increase in new orders, manufacturing firms' purchasing activity picked up in December following a decline in November.

As growth in new orders slowed, firms were able to continue to clear their backlogs.

The spare capacity in the sector, however, prompted manufacturing firms to trim workforce numbers.

This resulted in employment in the manufacturing sector falling for the second successive month and declining at a faster rate.

Firms cited growing supply-side challenges, with average lead times becoming longer in December.

In terms of prices, rising cost burdens from higher fuel, material and shipping prices led to firms raising selling prices.

Baluch said inflationary pressures, however, are expected to pose less of a threat this year compared to the start of 2023.

'Sluggish demand from overseas markets and tight borrowing conditions across the country will act as headwinds as we move into 2024,' she said.

Despite headwinds, Filipino manufacturers remain hopeful production will pick up, with business confidence at a four-month high in December amid expectations of improving demand and plans to step up marketing campaigns.