Philippine manufacturing activity continued to grow in September, reaching a two-year high and outperforming peers in Southeast Asia, S&P Global said in a report.
The Philippine Manufacturing Purchasing Managers’ Index (PMI) rose to 53.7 in September from 51.2 in August. It was the fastest reading since the 53.8 clip in June 2022.
“The Philippine manufacturing sector showed significant improvement at the end of the third quarter, as reflected in the latest PMI data,” Maryam Baluch, economist at S&P Global Market Intelligence, said in a report.
A PMI reading above 50 indicates better business conditions than in the past month.
The Philippines’ PMI – a single-digit composite indicator of manufacturing performance – has recorded a reading above 50 every month since September 2023.
The Philippines’ PMI reading was the highest among the five Association of Southeast Asian Nations (ASEAN) countries in September. It was ahead of Thailand, which recorded a score of 50.4.
In contrast, Malaysia (49.5), Indonesia (49.2), Vietnam (47.3) and Myanmar (45.5) showed a contraction.
The Philippine PMI was also above the regional average of 50.5, S&P Global said.
The headline PMI measures production conditions based on the weighted average of Ffive indices — new orders (30%), production (25%), employment (20%), supplier delivery times (15%) and purchasing inventories (10%).
S&P Global said strong growth in new orders boosted production volume, which also boosted hiring and purchasing activity.
“The respective seasonally adjusted indexes indicated a faster pace of growth this month, reaching 20- and 10-month highs respectively. Anecdotal evidence pointed to improving underlying demand trends, new customer acquisition and successful new product launches,” the report said.
Despite the increase in new orders, Ms. Baluch noted that demand for Philippine goods has declined “significantly” in international markets.
New export orders for Philippine goods fell for a second straight month in September, “with the latest recession the most severe in more than four years,” S&P Global said.
“While weak international demand and supply chain issues will create headwinds, robust domestic demand is expected to drive growth,” Ms. Baluch noted.
S&P Global said manufacturers ramped up hiring and purchasing activities in September to cope with the overall increase in new orders.
“The pace of employment growth, while modest, was the strongest since March. Nevertheless, growing job creation led to a rise in job backlogs in September, marking the first month of accumulation since May 2023,” S&P Global said.
In September, purchasing activity reached a 20-month high as some companies expect higher sales in the coming months and “want to protect themselves from predicted supply chain disruptions.”
However, S&P Global noted that the decline in supplier performance was also the largest since December 2022.
“Inflationary pressures also increased in September, with companies attributing this to higher supplier prices and weather conditions,” the report said, adding that input price levels in SeptemberFrose to the highest level in seven months.
“Price pressure also increased due to increases in supplier rates and recent weather conditions affecting raw material costs. However, inflationary pressures remain historically subdued, supporting the central bank’s recent decision to ease monetary policy,” Ms. Baluch said.
Looking ahead, FWith their scam, Irms remained confident about the performance of the manufacturing sector in the coming monthsFIdentity level highest since May.
Manufacturers also expect demand trends to continue to improve, which will support production growth.
“Operational efficiencies and an improved interest rate environment may have contributed to better manufacturing performance,” Terry L. Ridon, public investment analyst and chairman of think tank InfraWatch PH, said in a Viber message.
In August, the Monetary Board cut interest rates for the first time in almost four years. It cut the benchmark rate by 25 basis points to 6.25%, from a 17-year high of 6.5%.
Leonardo A. Lanzona, who teaches economics at Ateneo de Manila University, said external headwinds have affected the demand for Philippine goods in the international market.
“Shocks including war, climate change, geopolitical tensions, resurgent nationalism and growing attention to national security have resulted inFpressure, rising capital costs, Ffinancial distress and shrinking fiscal space, and challenges in achieving sustainability goals,” he said in a Facebook Messenger chat. — Beatriz Marie D. Cruz