Operating conditions in the local manufacturing sector strengthened moderately in December, supported by the first monthly expansion in output for nine months, the IHS Markit reported.
The IHS Markit Philippines Manufacturing Purchasing Managers’ Index (PMI) rose fractionally to 51.8 last month from 51.7 in November, registering above the 50 no-change threshold that separates expansion from contraction.
Shreeya Patel, IHS Markit economist said on Monday, Jan. 3, that an improvement in domestic demand and a slight uptick in output—the first for nine months—supporting the manufacturing sector’s expansion.
Patel also said companies were optimistic that demand will continue to improve in the coming months, and as a result prepared through advance ordering strategies.
"The Philippines manufacturing sector remained in a solid position during the closing month of 2021, with the headline PMI at a nine-month high,” Patel said.
However, she said supply-side issues and virus-related restrictions threatened the sector once again.
“Delivery delays were pronounced and often hindered production. Shortages meanwhile continued to drive up expenses, despite some signs of a moderation in input and output prices in December,” Patel said.
Looking ahead, Patel said the Omicron variant will almost certainly hit the Philippines manufacturing sector, and in more ways than one.
“Supply-side issues are likely to persist while case numbers and input price inflation could climb further as we head into the new year,” Patel said.
In December, new orders jumped, which encouraged companies to add to their input inventories for the fourth month running.
As a result, firms raised their output expectations for the year ahead which improved to a near two-year high. That said, there were still widespread reports of material scarcity and supply-chain disruption.
On the price front, input and output price rises remained historically elevated following higher material and transportation expenses. The rates of inflation in both cases moderated, however.
“Looking ahead, firms were upbeat about their output expectations for the next 12 month. Sentiment improved to the strongest since January 2020 with firms foreseeing higher customer numbers and a return to normality in 2022,” IHS said.