Philippines: Manufacturing PMI gains ground at start of 2020
February 3, 2020
The manufacturing Purchasing Managers’ Index (PMI), produced by IHS Markit, rose to 52.1 in January from 51.7 in December,. Consequently, the index remained above the 50-threshold that indicates improving business conditions in the sector over the previous month.
Better operating conditions in January came on the back of a pick-up in output, despite disruptions from the recent Tall volcano eruption near the capital Manila. Meanwhile, new orders increased at a solid pace, supported by both domestic and foreign demand. Export sales rose in January, alluding to an improving trade climate. Amid improving demand, firms ramped up purchasing activity at the beginning of the year, leading to an increase in inventories. Goods producers’ confidence brightened in January thanks to their positive outlook for new projects and the government’s infrastructure boon. On the downside, employee head counts fell for the first time in seven months, with anecdotes suggesting firms decided not to replace workers who had resigned. Despite depressed hiring activity, manufacturers continued to reduce outstanding business.
On the supply side, delivery times increased at the quickest rate in over two years in January due to traffic congestion caused by the volcano eruption.
On the price front, input cost inflation accelerated on higher raw material prices. In response, manufacturers raised output charges at the fastest pace in seven months.
Commenting on January’s results, David Owen, economist at IHS Markit, stated:
“Whilst some businesses were notably affected by the Taal volcano eruption in January, for the most part, the Philippines manufacturing sector continued to grow in January […] However, one clear issue heightened by the eruption was road traffic, which has disrupted delivery times in each of the past six months. The government is seeking to address this with their "Build, Build, Build" project to place greater investment in road infrastructure."
Author: Lindsey Ice, Economist