Philippines: Manufacturing sector grows at a weaker pace in January
February 1, 2019
The manufacturing Purchasing Managers’ Index (PMI), produced by Nikkei and IHS Markit, dipped to 52.3 points in January from 53.2 points in December, which was well below the survey’s long-term average of 53.7 points. Nevertheless, the index remained above the critical 50-point threshold that separates expansion from contraction in the manufacturing sector.
Although production continued to climb at the start of the year, it did so at the softest rate in four months. Meanwhile, new business inflows remained strong in January, but external demand waned further with export orders declining for the fifth consecutive month. Employment fell for the first time in six months, although anecdotes suggests this was due employee resignations, while purchasing activity rose at the weakest pace in the series’ three-year history. Despite lower staff levels, firms worked through backlogs of work at a strong rate, and delivery times increased only marginally as Manila port congestion finally eased. Finally, firms’ business confidence waned to the second lowest level in the survey’s history, but firms remained nonetheless optimistic about the year ahead.
On the price front, input-cost inflation inched up in January, largely due to higher material prices and a stronger dollar, however manufacturers passed on the costs through hiking their output prices.
Regarding January’s performance David Owen, economist at IHS Markit, commented: “January data suggested a slow start to the year for Filipino manufacturers. […] Export orders fell for the fifth month in a row, as China, their top export destination, reported slower growth during 2018. This news may add to fears that exports could slow even further in the first quarter. Nevertheless, strength in the domestic market should carry the industry through a potentially turbulent period.”
Author: Lindsey Ice, Economist