By means of Aubrey Rose A. Inosante, Reporter
PHILIPPINE factory activity ended 2024 on a high as growth in December was the fastest since November 2017, driven by an increase in production and new orders, S&P Global said Thursday.
The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) rose to 54.3 in December from 53.8 in the previous month.
This matched the April 2022 print and was the strongest improvement in operating conditions since the 54.8 reading in November 2017.
A PMI reading above 50 indicates an improvement in business conditions, while a reading below 50 indicates a deterioration.
“The Philippine manufacturing sector ended 2024 on a positive note, with further improvements in demand, resulting in a sharp and significant increase in new orders and production,” Maryam Baluch, economist at S&P Global Market Intelligence, said in a report.
The Philippines’ PMI reading remained the fastest among the six member states of the Association of Southeast Asian Nations (ASEAN) in December. It was ahead of Thailand (51.4), Indonesia (51.2) and Myanmar (50.4).
A contraction in industrial activity was observed in Vietnam (49.8) and Malaysia (48.6).
In its report, S&P Global said manufacturing and new orders “positively impacted” the Philippines’ PMI reading in December.
“Sharp expansions in both new orders and production were reported, supported by anecdotal evidence of robust underlying demand trends, product diversification and new customer acquisition,” the report said.
International markets saw a revival in demand, leading to the first increase in new export orders in five months, S&P Global said.
An increase in production needs prompted manufacturers to ramp up purchasing activities, with input purchases increasing at the fastest pace in almost two years.
“A sustained increase led to a resumption of pre-production inventory building after two consecutive months of contraction,” the report said.
S&P Global said supplier performance deteriorated sharply in December, albeit at a slower pace than in November.
“The surge in purchasing activity put pressure on supply chains and caused trafficFic and port congestion, according to panel members,” the report said.
Manufacturers cut workforces in December, ending three straight months of hiring.
“While production efficiencies allowed manufacturers to keep their jobs under control, it also led to a slight decline in employment, ending a three-month streak of job creation. However, this could be a temporary blip, especially if demand remains resilient in 2025 as expected,” Ms Baluch said.
S&P Global said rising costs for materials and suppliers were being passed on to customers, although data showed inflationary pressures were easing.
“December revealed a moderation in inflationary pressures, marking a shift from the peak observed in November. In fact, cost burdens and production burdens increased at a historically moderate pace,” said Ms. Baluch.
Manufacturers remained optimistic about 2025, although confidence levels fell to the lowest in four months.
“Companies remained confident that production would rise in the coming year, amid hopes that demand trends will continue to strengthen and plans to launch new products,” S&P Global said.
Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp., said factory activity improved in December due to the “spike in demand for many businesses/industries during the Christmas holiday in the fourth quarter.”
“Faster manufacturing PMI data would be a bright spot for the Philippine economy, which could fundamentally lead to faster GDP (gross domestic product) growth as one of the leading economic indicators,” he said.
In an email, Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, said the Philippines remains an outperformer in manufacturing in the region.
The Philippines’ PMI reading was above the ASEAN average of 50.7 in December. For 2024, the ASEAN PMI value averaged 51.
He noted that the ASEAN Purchasing Managers Index was “weaker than we expected, although the headline drop was mainly driven by the bloc’s more developed members hitting a wall late last year.”
Mr Chanco said ASEAN PMI data suggests factory activity should remain stable in the near term.
In a separate report, S&P Global said manufacturing companies in the ASEAN region were optimistic for the year ahead, although confidence fell to the lowest level in eight months.
“While the production outlook for 2025 remains positive, it has declined slightly. New order growth remains mild and strongly dependent on domestic demand, while weak international demand continues to hamper growth,” Baluch said.