Philippines: Factory output hits 3-month high in September

MANILA, Philippines — The country’s manufacturing activity continued to grow in September, rising to a three-month peak, due to stronger demand.

S&P Global Market Intelligence said in a report released yesterday that the Philippines’ manufacturing purchasing managers’ index (PMI) was at 52.9 in September, up from the 51.2 in August.

The latest reading is the highest in three months, and is quicker than the series average of 51.8.

It also marked the eighth straight month that the PMI was above the 50 threshold, showing further improvement in the country’s manufacturing sector.

The PMI, which is derived from a survey covering around 400 manufacturers, measures the performance of the manufacturing sector based on the following: new orders, output, employment, suppliers’ delivery times, and stocks of purchases.

“Growth across the Filipino manufacturing sector quickened in September, according to the latest PMI data. Firms noted that an increase in customer demand allowed production levels and factory orders to grow for the first time since June,” S&P Global Market Intelligence economist Maryam Baluch said.

While Philippine manufacturing firms saw an increase in new business inflows in September, S&P Global said the growth was seen to be driven by domestic demand as foreign demand for locally made goods weakened.

As new sales increased, S&P Global said local manufacturing firms continued to hire workers.

In line with greater output, firms purchased additional inputs for production.

In anticipation of greater demand, firms also increased both their pre- and post-production stocks.

When it comes to prices, Baluch said inflationary pressures moderated in the latest survey period, hinting that inflation may have peaked.

“That said, inflation rates remained sharp and could still be harmful to demand conditions, with firms citing rising material and energy prices, alongside an unfavorable exchange rate, which could place upward pressure on costs,” Baluch said.

Inflation eased slightly to 6.3 percent in August from 6.4 percent in July, bringing the average for the January to August period to 4.9 percent.

Last week, the Bangko Sentral ng Pilipinas said it expected the September inflation rate to be higher or within the 6.6 to 7.4 percent range due to the uptick in food prices and electricity rates as well as the depreciation of the peso against the dollar.

Baluch said widespread supply-chain issues also continue to hamper production.

Despite this, the 12-month outlook for output is strongly positive and at its highest since August 2018.

“Overall, sustained growth across the sector has meant that firms are largely optimistic in regard to expansion in output in the future,” Baluch said.

Commenting on the latest PMI, Rizal Commercial Banking Corp. chief economist Michael Ricafort said risks to the country’s manufacturing growth in the coming months include higher prices, rising interest rates that would increase borrowing costs for new investments or expansion of some manufacturers, a recession in the US, continued lockdowns in China and a prolonged Russia-Ukraine conflict.