Factory output hits 7-month high in October

MANILA, Philippines — Philippine manufacturing activity in October expanded at its fastest pace in seven months as demand continued to improve, according to S&P Global.

The S&P Global Philippines manufacturing purchasing managers’ index (PMI) rose to 52.4 in October from 50.6 in September, showing the second straight month of improvement in operating conditions.

The latest PMI reading also showed the fastest upturn in seven months.

A PMI reading above 50 indicates an overall increase compared to the previous month, while below 50 means contraction.

The PMI, which is a gauge of manufacturing activities, is based on a survey of around 400 manufacturers and covers the following: new orders, output, employment, suppliers’ delivery times and stocks of purchases.

“PMI data for the Philippines manufacturing sector signaled that improving underlying demand trends supported quicker expansions in the two largest constituents of the PMI – new orders and output – at the start of the fourth quarter,” S&P Global Market Intelligence economist Maryam Baluch said.

New clients and improved demand conditions supported the growth in new orders received by manufacturing firms in October.

Amid improving demand, growth in production volumes picked up, with output rising for the 14th consecutive month in October and posting the fastest rate of increase in five months.

Baluch said increased workloads also supported growth in buying activity and employment.

As buying activity increased, manufacturers were able to build their stock levels.

Improved vendor performance made it easier for firms to receive inputs in a timely manner and average lead times were shortened for the second straight month, although slightly less than what was seen in September.

“Additionally, price pressures continued to fade signaling the easing of strong inflationary pressures seen for the most part of the last two years,” Baluch said.

For the coming year, manufacturers in the Philippines have an optimistic outlook, with over a third expecting higher output.

The degree of confidence, however, weakened during the period in review and was the lowest for 16 months.

“Filipino manufacturers remained optimistic, with growth in output anticipated in the year ahead. However, global headwinds and the lagged effects of the monetary policy tightening remain a downside risk to the sector,” Baluch said.

Commenting on the data, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the economic reopening in China, one of the Philippines’ biggest trade partners, is among the positive factors for the manufacturing sector in the coming months.

“Further easing of the year-on-year inflation and in local interest rates (especially long-term tenors) later this year and into 2024 would also support some pick up in manufacturing activities for the coming months, on top of the further reopening of the Philippine economy toward greater normalcy with no more large scale lockdowns since 2022 and no more COVID restrictions as a policy priority, going forward,” he said.