Philippines: Manufacturing business conditions improve in December
January 2, 2020
The manufacturing Purchasing Managers’ Index (PMI), produced by IHS Markit, rose to 51.7 in December from 51.4 in November. As a result, the index remained above the 50-threshold that indicates improving business conditions in the sector.
December’s improvement was driven by stronger new orders growth compared to in November, which was buttressed by a slight recovery in foreign business inflows following five declines in the last six months. Stronger sales prompted firms to increase hiring activity in the month. Conversely, output growth moderated to an over two-year low in December, with anecdotes suggesting that delays in input deliveries and raw material shortages played a role in weaker production. Meanwhile, firms continued to work through outstanding business, while purchasing activity slowed to a 10-month low pace. On the supply side, delivery times continued to increase due to traffic congestion, poor weather conditions, and bottlenecks at the port in Manila. Goods producers’ confidence weakened in December, although they maintained an optimistic outlook for production in the new year, thanks to strong sales and government infrastructure projects.
On the price front, input cost inflation eased due to weaker input demand, although some raw material prices climbed higher amid shortages. In response, manufacturers raised output charges, albeit at a softer rate.
Commenting on the latest survey results, David Owen, economist at IHS Markit, stated:
“The Philippines manufacturing sector remained in a relatively solid position in December […] Most notably for manufacturers though are clear supply-side issues that are restricting output. Growing road and port congestion, particularly in Manila, remain a key feature of businesses' concerns. […] production is being limited, and may remain so until these issues have been addressed."
Author: Lindsey Ice, Economist