Philippines manufacturing sector 2nd best performing in Asean

MANILA, Philippines - Despite a slower growth in April, the Philippine manufacturing sector remains the second best performing in the ASEAN region next to Vietnam, according to the Nikkei ASEAN Manufacturing purchasing managers’ index (PMI) released by IHS Markit yesterday.

The domestic factory sector registered a PMI reading of 53.3 percent in April next to Vietnam’s 54.1 percent. With the exception of Thailand, other Southeast Asian manufacturers – Myanmar, Indonesia, Malaysia and Singapore – also registered solid to moderate increases in output during the month.

The Nikkei ASEAN Manufacturing PMI registered a reading of 51.1 in April, an improvement from 50.9 in March. IHS Markit noted the rate of improvement was the quickest in 33 months.

ASEAN manufacturers reported faster increases in both output and new orders during the reference period but remain burdened by inflationary pressures.

IHS Markit said the domestic markets remain a key growth driver for ASEAN manufacturers but an upturn in foreign demand has been seen since September last year.

Despite the greater demand, manufacturers in the region are able to cope with increased demand as shown in falling work backlogs.

Input costs eased slightly in April but remained high, causing firms to raise the prices of their goods.

 “Singapore reported a significant rise in input costs, where the pace of increase reached the quickest in almost three-and- a-half years. In comparison, a marginal rise was observed in Thailand,” IHS Markit said.

“The ASEAN manufacturing sector started the second quarter on a stronger footing, building on the growth momentum seen in the first quarter. Growth was modest but nevertheless the strongest in nearly three years,” said IHS Markit economist Bernard Aw.

“The upturn remained largely broad-based, and underpinned by stronger increases in new orders and production. Notably, a revival of export order growth also contributed to the improvement in the sector. Factories also stepped up purchasing activity,” Aw said.

He noted, however, that there are still challenges to sustaining the upturn among which is cost inflation pressure.

 “On the price front, input cost inflation continued to increase at a quicker rate than firms’ selling prices, suggesting an ongoing squeeze on margins. This could weigh on future plans for hiring and investment, if the trend holds. Lastly, future expectations for manufacturing output continued to ebb, with substantial variations in the degree of business confidence observed across the region,” Aw said.