‘While weak international demand and supply chain issues will act as headwinds, robust domestic demand is expected to drive growth.’
Overall growth in new orders in the manufacturing sector has supported a stronger increase in output in August, the rate of this growth quickening from July’s four-month low, although demand was mostly domestic driven, according to a new S&P Global report.
philippine news agency
The Philippine manufacturing sector ended the third quarter well, the good performance driven by strong expansion in new orders, despite growing challenges which include deteriorating supplier performance and a downtick in new export orders, according to the latest Purchasing Managers’ Index data by S&P Global.
The headline S&P Global Philippines Manufacturing PMI — a composite single-figure indicator of manufacturing performance — has posted in growth territory (above the 50.0 neutral mark) in each month since September 2023.
Moreover, the latest index reading of 53.7 for September, up from 51.2 in August, was the highest since mid-2022, indicating a solid improvement in the health of the Philippine manufacturing sector.
Strong matching rates of expansion
The uptick in the headline index was driven by strong and matching rates of expansion in both new orders and output, fueled by improving underlying demand trends, new client wins and the successful launch of new products, said the report.
However, Filipino goods did not fare well internationally, seeing a second consecutive monthly decline in new export orders in September, with the latest downturn the most severe in over four years. Nonetheless, the overall rise in new orders meant that firms were able to raise both their hiring and purchasing activities.
The manufacturing industry continues to face rising challenges. The increase in pre-production inventories in September was modest, and the decline in vendor performance was the most pronounced since December 2022.
Price pressures
Price pressures also rose due to supplier charge increases, and recent weather events affecting raw material costs. Fortunately, inflationary pressures remain historically subdued.
“While weak international demand and supply chain issues will act as headwinds, robust domestic demand is expected to drive growth. Moreover, increasing production needs and heightened confidence among manufacturers led to increased hiring and purchasing activity in September,” said Maryam Baluch, economist at S&P Global Market Intelligence.
Finally, expectations for the year-ahead outlook for output brightened in September, with confidence among manufacturers the highest since May.
“Firms anticipate that demand trends will continue to improve, and thus should support further growth in production,” Baluch said.
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