Factory output slows to 7-month low in March

MANILA, Philippines — The country’s manufacturing activity growth in March slipped to its slowest rate of expansion in seven months amid high operating costs.

S&P Global, in a report, said yesterday that the Philippines’ Manufacturing Purchasing Managers’ Index (PMI) eased to 52.5 in March from 52.7 in February.

The PMI is based on a survey of around 400 manufacturers and takes into account the following: new orders, output, employment, suppliers’ delivery times, and stocks or purchases.

A reading above 50 means an overall increase compared to the previous month, and below 50 indicates a decline.

“The first quarter of 2023 concluded on a solid note, with a further expansion reported across the Filipino manufacturing sector, according to the latest PMI data. Both output and new orders rose at historically strong rates. Consequently, firms raised their buying activity to keep up with the growth in sales,” S&P Global Market Intelligence economist Maryam Baluch said.

S&P Global said the increase in both production and new orders was seen as demand for manufactured Filipino goods remained strong.

Raw material shortages, higher energy prices and delivery delays, however, were cited as drivers for the sharp increase in operating costs.

While the incidence of delays was among the weakest since the current sequence of deterioration in vendor performance began in August 2019, S&P Global said port congestion and material shortages led to longer lead times.

It said delivery delays have resulted in an increase in backlogs.

When it comes to employment, the latest data pointed to a second consecutive month of job cuts.

“Despite a slight slowdown, March data revealed pressures on inflation and supply chains easing,” she said.

The country’s inflation rate eased slightly to 8.6 percent in February from the 14-year high of 8.7 percent in January, due to slower increases in transport and food prices.

Last week, the Bangko Sentral ng Pilipinas said inflation likely slowed in March within the range of 7.4 to 8.2 percent, citing the rollback in local petroleum prices, lower prices of fruits and vegetables, as well as the decline in chicken and sugar prices.

S&P Global said Filipino manufacturers remain optimistic, with more than half of respondents expecting higher output in the coming months.

“Business confidence across the sector remained upbeat, as strong demand conditions buoyed optimism in the outlook for future output,” Baluch said.