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Philippines PMI December 2017

Philippines: Manufacturing PMI closes 2017 on a strong note

The manufacturing Purchasing Managers’ Index (PMI) came in at a robust 54.2 in December, slightly down from 54.8 in November according to a release provided by Nikkei and IHS Markit. The PMI thus remained comfortably above the critical 50-point threshold which separates expansion from contraction in the manufacturing sector.

Growth in output and new orders remained robust in December, although somewhat slower compared to the previous month. This prompted firms to increase employment for the third consecutive month. Domestic demand was again the main driver of sales growth, while growth in external orders remained subdued. Despite the notable rise in new orders, backlogs of work continued to fall as additional staff enabled companies to expand production robustly.

On the price front, rising costs for input prices, especially imported raw materials, led to robust cost inflation and higher selling prices. An upturn in prices for raw materials, a weaker currency and custom tax hikes were behind the price increases. On a more positive note, businesses became more optimistic in December, as confidence regarding the 12-month outlook strengthened.

Commenting on the release, Bernard Aw, Principal Economist at IHS Markit, noted that:

“The Philippines manufacturing economy finished the year with its best quarter for 2017, setting the scene for stronger growth as the country moves into next year […]. Meanwhile, the PMI’s gauge of input prices, which exhibits a strong relationship with official consumer inflation data, slowed in December, suggesting headline inflation may have peaked and is likely to turn down from its current three-year high […]. As these pressures subside, the likelihood is inflation will remain within the central bank’s target of 2-4% in 2018.”

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