Philippine factory growth picks up in April

MANILA, Philippines — Philippine manufacturing activity gained strength in April, kicking off the second quarter on a strong note driven by robust demand conditions, according to monthly tracking done by IHS Markit for Nikkei, Inc.

The seasonally adjusted Nikkei Philippines Manufacturing Purchasing Managers' Index rose to 52.7 last month from 51.5 in March.

The latest PMI figure was the highest for the year so far, signaling a solid improvement in the sector’s health.

A reading above 50 indicates economic expansion, while a reading below 50 points toward contraction, Nikkei explained.

“The Philippines manufacturing sector started the second quarter on a robust note with growth in both output and new orders strengthening,” said Bernard Aw, principal economist at IHS Markit, adding that bullish export sales partly supported greater demand that was matched by an uptick in production.

According to Nikkei, the positive developments in April prompted Filipino manufacturers to hire more workers, which, in turn, decreased the level of unfinished business, although at a slower pace than a month ago.

“The rise in production and job gains helped firms to work through their backlogs,” Nikkei said.

Costs

However, Nikkei said average cost burdens rose in April due to higher fuel prices, among others.

A weaker exchange rate and the lingering impact of new excise taxes also elevated input prices, prompting firms to pass on higher costs to their customers by raising selling prices.

“First quarter manufacturing expansion was affected by the January rollout of the new excise taxes, but April data suggests that demand has since adjusted to these higher levies,” IHS Markit’s Aw said.

Meanwhile, business optimism over the next 12 months slipped to a historic low in April, Nikkei reported, but the majority of firms remained confident that new product designs, a solid economic climate, planned business expansions and a wider product range will boost output growth.

“With companies’ optimism remaining high, despite the dip in April, it looks likely that growth may well accelerate further in coming months,” Aw added.