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Philippines: Manufacturing sustains growth momentum in April
MANILA, Philippines – Domestic manufacturing sustained its growth momentum in April although at a slower pace compared to March, according to the latest reading of the Nikkei Philippines Manufacturing purchasing managers’ index (PMI)
Domestic factory output registered a PMI reading of 53.3 in April, slightly down from 53.8 in March but nonetheless signaling “another solid improvement in the health of the sector.”
Both readings still indicate an improvement in business conditions and activity as a reading below 50 indicates the opposite. The Nikkei Manufacturing PMI is released monthly ahead of official economic data.
Growth in output and new orders – despite being slower compared to the previous month – remained the key drivers for the performance of the manufacturing sector in April, said IHS Markit, which collected data for the index.
Rising client demand and business optimism also prompted firms to hire more workers and purchase capital goods.
Suppliers also remained capable of handling greater demand but the depreciating peso still made it more expensive for manufacturers to buy inputs. As a result, producers implemented another round of increase in factory prices to cover cost inflation.
“Prices for manufactured goods rose in tandem with greater costs as firms sought to protect margins,” said IHS Markit.
The domestic market remained the main engine of manufacturing growth primarily because of strong economic growth and increased construction activities.
Slower overseas demand for Filipino products also indicate prospects are better at home.
“Overseas demand for Filipino products grew at the slowest in 14 months, suggesting that the domestic market remained the main engine for manufacturing growth,” said IHS Markit.
Strong inflows of new orders and launches of new products also contributed to increased factory output during the month.
“Nikkei Philippines PMI data suggests the solid manufacturing upturn seen in the first quarter was sustained into the second quarter, underpinned by domestic demand. There were further signs that growth momentum will be sustained for the rest of the quarter, as forward-looking indicators such as new orders and expectations continued to show robust trends,” said IHS Markit economist Bernard Aw.
“The domestic market continued to be the key driver of manufacturing growth, with foreign demand for Filipino manufactures rising only modestly despite depreciation of the peso. However, the weaker local currency led to costlier imported inputs. Cost inflation remained elevated, which prompted firms to raise charges to protect their margins,” he added.
Amid increased demand, Aw sees no risk of an overheating manufacturing sector as the level of incomplete work, or factory backlog, continues to fall for the 14th straight month.
“Despite an ongoing increase in demand, there seems to be no risk of an overheating manufacturing sector. Filipino factories continued to hire more workers and supply chains remained clear. As such, PMI data signalled another drop in backlogs,” he said.
Increased construction activity alongside greater public infrastructure spending are expected to support the manufacturing industry in the coming months, said Aw.
Source: http://www.philstar.com/business/2017/05/03/1696073/manufacturing-sustains-growth-momentum-april