Philippines: Manufacturing sector starts 2018 on a low note
The manufacturing Purchasing Managers’ Index (PMI) declined to 51.7 in January, significantly down from 54.2 in December according to a release provided by Nikkei and IHS Markit. The PMI nevertheless remained above the critical 50-point threshold which separates expansion from contraction in the manufacturing sector.
Growth in output and new orders weakened markedly in January. This prompted firms to increase employment at a slower rate than in December. Demand was particularly hit by the newly introduced excise tax hikes. Because of the notable deceleration in growth in new orders, backlogs of work continued to fall.
On the price front, input prices rose notably due to higher excise taxes, a weaker peso and higher global commodity prices. This led to robust cost inflation and higher selling prices, with selling prices rising at the fastest pace on record. On a more positive note, businesses remained strongly optimistic in January, as confidence regarding the 12-month outlook remained buoyant.
Commenting on the release, Bernard Aw, Principal Economist at IHS Markit, noted that:
“One area of concern is the renewed pick-up in price pressures, which could pose as a downside risk to future growth […]. Given the strong relationship between PMI’s gauge of input prices and official consumer inflation data, we could see stronger consumer price pressures in early 2018.”