Philippine factories open 2023 strong as output soar to 7-month high
MANILA, Philippines — Local factories opened the year strong, with output soaring to a 7-month high as the economy’s reopening brightened the sector’s prospects.
A survey of around 400 manufacturers in the country found that the Philippines’ Purchasing Managers’ Index (PMI), a gauge of manufacturing output, grew 53.5 in January from 53.1 in December, S&P Global said in a report on Wednesday.
The latest reading settled above the 50-benchmark separating growth from contraction. S&P explained the leap in the December PMI “signaled sustained growth.”
“The data also suggested that the aggressive monetary stance taken by the central bank has been effective as further signs of easing price pressures were recorded in January. Encouragingly, demand has yet to be impacted negatively by policy changes,” Maryam Baluch, economist at S&P Global, said in a commentary.
The Bangko Sentral ng Pilipinas injected increases in interest rates in 2022 to combat inflation, which hit a 14-year high as of December. The policy rate currently stands at 5.5%.
That said, Baluch noted there was a lot of optimism going around the sector, as output and new orders improved. Based on anecdotal evidence, demand for Filipino-made manufactured goods was seeing a resurgence to start the year.
China reopening drives growth
The latest PMI report supported this assertion, since demand from China and a boost in international client numbers, supported the upswing in exports for the first time in 11 months.
Domini Velasquez, chief economist at China Banking Corp., was pleasantly surprised at the latest figures.
“A large part is driven by China's reopening. We also saw improvements in most ASEAN countries in January. This trend will likely persist through 2023,” she said in a Viber message.
The latest PMI report revealed that supply chain pressures such as port restrictions have shown signs of easing, which benefitted local factory output and demand.
S&P Global noted that the holdings of post-production inventories dropped for the first time in a year since factories began tapping stocks to fulfill new orders and meet demand.
This, however, did not translate in greater hiring conditions for local factories. The report found it “weak” as the sector face layoffs and resignations, which continued to hurdle job creation.
Despite this, a projected global economic slowdown could still muddy prospects as recessions could hit the country’s major trading partners. Velasquez still found reason to cheer the sector’s growth.
“Additionally, both domestic and foreign demand proved to be resilient compounded with lower input costs. Given this, we will likely see the manufacturing sector continue to outperform despite a bottoming out of the global economy this year,” she added.
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