THE country’s manufacturing sector continued to be in expansion mode but registered its slowest growth in seven months, according to the latest report from Standard & Poor’s (S&P) Global.
Based on the latest Purchasing Managers’ Index (PMI) report, the Philippines’s PMI slowed to 52.5 in March. This remains above the 50-mark that indicates the manufacturing sector continues to expand.
However, S&P data showed the country’s PMI is slightly slower compared to 52.7 in February 2023 and 53.2 level posted in March 2022.
“Operating conditions improved at the slowest pace in seven months, partly due to the softer rise in production and stocks of purchases, and with a second month of job shedding weighing on the headline index,” Maryam Baluch, Economist at S&P Global Market Intelligence, said.
The report said the upturn in production was largely underpinned by the strong upturn in new orders. Firms noted that a stronger demand environment, new projects and a broader clientele helped boost sales.
However, the data showed that foreign demand increased at a slower pace, leading the data for March to see a slower increase.
According to the report, goods producers raised their purchasing activity in March in order to support growth in new orders and mitigate against future hikes in costs. However, the pace of growth eased from January’s recent high as high input prices deterred some goods producers.
“Despite a slight slowdown, March data revealed pressures on inflation and supply chains easing. Operating expenses rose at the slowest pace in 27 months, while the incidence of delays was among the weakest since the current sequence of deterioration in vendor performance began in August 2019. Business confidence across the sector remained upbeat, as strong demand conditions buoyed optimism in the outlook for future output,” Baluch said.
Based on the data, inflationary pressures eased as greater demand for inputs, higher prices for energy and material scarcity continued to drive operating expenses.
That said, S&P said the rate of input price inflation was the slowest since December 2020, and softer than the historical average.
The pace of charge inflation also eased from February and was solid overall, as some firms mentioned that increased competition resulted in less marked upticks in selling prices.
“Filipino manufacturers remained strongly optimistic, with more than half of the respondents predicting growth in output in the year ahead. That said, the degree of confidence was below the historical trend,” the report stated.
Last week, higher consumer demand for various products and services as well as the reopening of the economy made businesses in the country optimistic about the next 12 months, according to the Bangko Sentral ng Pilipinas (BSP).
Based on the data, business confidence for the next 12 months rose to 61.9 percent from 46.2 percent in the last quarter of 2022.
However, the optimism of businesses was not as high as the 69.8 percent level recorded in the first quarter of 2022, as businesses expect more borrowings and higher inflation at least for the first quarter of 2023 and in the near-term.
Other reasons cited by the BSP for the rise in optimism were the increased business activities and sustained economic recovery as well as expansion and new business opportunities in health care, manufacturing, and construction subsectors.
In terms of inflation expectations, businesses said they expect inflation to breach the upper end of the national government’s 2 to 4 percent target for 2023 and 2024.
Businesses expect inflation for the first and second quarters of 2023 to average 7 percent and 6.9 percent, respectively. However, in the next 12 months, inflation is expected to be lower at 6.6 percent.
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