Factory activity showed strong gains at the beginning of the year as firms raised their production levels and sharply bumped-up their buying activity due to strong and accelerated upturn in new orders, the latest survey from S&P Global revealed.

The Philippines’ S&P Global manufacturing purchasing managers' index (PMI) edged up above the no-change 50.0 threshold for the third month running, hitting a seven-month high of 53.5 in January from 53.1 in December last year.

Maryam Baluch, S&P Global Market Intelligence economist, said on Wednesday, Feb. 1, that operating conditions across the manufacturing sector improved solidly during the month, with sharp upturns were noted in both output and new orders.

Baluch also noted that the latest PMI data suggest that the aggressive monetary stance taken by the Bangko Sentral ng Pilipinas (BSP) has been effective as further signs of easing price pressures were recorded last month.

But despite higher interest rates, Baluch said that “encouragingly,” demand has yet to be impacted negatively by policy changes.

"Additionally supply chain pressures also eased further, with panellists citing that improved infrastructure, more vendors and lifting of port restrictions helped with delivery times,” Baluch said.

"Overall, strong domestic demand fed into higher optimism for the year ahead. Moreover, the lack of COVID restrictions, greater investment in new products and undertaking new projects aided hopes of a prosperous year for the Filipino manufacturing sector,” she added.

Additionally, foreign demand for goods manufactured in the Philippines also picked up in January. Growing international client numbers and stronger demand from China helped revive exports for the first time in 11 months.

Moreover, yhe latest rise in buying activity reflected firms' willingness to meet growing demand. The rate of expansion was among the fastest on record.

Furthermore, with the sustained rise in client activity, manufacturing companies reported a rise in the levels of unfinished work in January - marking only the fifth month of growth in backlogs of work since the series began in January 2016.

Stronger demand conditions also resulted in manufacturers relying on inventories. For the first time in a year, holdings of post-production inventories fell as firms utilized stocks to meet higher new orders.

Encouragingly, while demand continued to strengthen, it did not result in operating expenses reheating. Instead, cost pressures moderated further in January.

The pace of input price inflation was the slowest in two years and below the survey average, with charges levied also rising at a softer rate than that seen in over a year.

However, rising business requirements did not fully translate into a higher intake of workers as hiring activity across the Filipino manufacturing sector remained weak.

The respective seasonally adjusted index edged close to the 50.0 neutral mark, indicating only a fractional rise in employment during January. Mentions of layoffs and resignations limited the pace of job creation.

“Overall, the continued positive performance of the manufacturing sector in January resulted in higher levels of optimism across surveyed business. Improving from a four-month low in December, the degree of confidence was stronger than the historical average,” S&P Global said.

“Close to two-thirds of the panellists anticipated higher output in the coming 12 months compared to just one percent that were downbeat,” it added.