PHILEXPORT News and Features
Despite a modest expansion in new orders, Philippine production levels fell for the first time in 20 months in March as manufacturers grappled with material shortages, according to a new S&P Global report.
After stalling in February, output fell for the first time since July 2022 in March, with companies saying material shortages hampered capacity, as evidenced by the lengthening of supplier lead times.
“The downturn came despite firms in general recording sustained demand for goods. However, if firms are able to successfully secure materials and build their stocks, the downturn in output could be fleeting,” said Maryam Baluch, economist at S&P Global Market Intelligence.
The headline S&P Global Philippines Manufacturing PMI, a composite single-figure indicator of manufacturing performance remained broadly unchanged from 51.0 in February to 50.9 in March. The latest reading marked a seventh consecutive monthly improvement in operating conditions across the Philippines manufacturing sector, but one which was modest overall.
The latest improvement across the sector was propelled by a further expansion in new orders received in March. However, the rate of growth was the second weakest in the current seven-month sequence of expansion.
The growth in new orders also supported a marginal rise in buying activity, with firms keen to rebuild inventory levels. The quarter ended with fresh and stronger expansions in holdings of both pre- and post-production inventories.
In terms of prices, cost pressures eased last month. Though firms said prices of raw materials continued to rise as a result of El Nino and material shortages, some noted that suppliers had moderated hikes in their charges in a bid to drive sales. As a result, cost burdens rose at the weakest pace since October 2020. Furthermore, Filipino goods producers slightly reduced their selling prices for the first time in nearly four years.
Meanwhile, rising new work spurred hiring activity, with job creation noted for the second straight month. Moreover, the rate of growth was the strongest recorded in one-and-a-half years.
Looking at the year ahead, manufacturers across the Philippines maintained an optimistic outlook for output, but evinced lower confidence levels.
“Sentiment among manufacturers weakened and was the least optimistic in nearly four years. Firms were concerned that increased market competition would limit growth prospects. However, hopes of demand conditions domestically and globally strengthening continued to buoy confidence levels.”
