As the year came to an end, the local manufacturing sector reported even slower growth in December, primarily due to a notable decrease in the rate of new order placements.

In December 2023, the S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) increased to 51.5, marking a deceleration from November's nine-month peak of 52.7.

A PMI number above 50 indicates an improvement in manufacturers' operating conditions, while a reading below 50 signifies a decline.

“Central to the slowdown across the sector was a notable softening in new order growth,” S&P Global said. “The rate of increase was the weakest in the current four-month period of expansion and modest overall.”

Moreover, S&P Global said the overall sales growth was concentrated in the domestic market, as demand from international export markets weakened.

Manufacturers noted a significant and recent decline in new export sales in December.

“Similarly, manufacturing output also expanded at a weaker rate,” S&P Global said, but also pointed out that the production growth remained strong, supported by a sustained rise of new orders.

Additionally, businesses reported increasing supply-side challenges as average lead times continued to lengthen last month due to congestion and extended delivery times for imports.

Even though the growth in new orders slowed down, S&P Global ponted out that companies were able to keep up with their work, as the amount of unfinished work fell for the 10th month in a row in December.

However, with extra capacity in the sector, manufacturers decided to reduce their number of workers in December for the second month in a row, and at a faster rate.

In terms of prices, S&P Global said that although inflationary pressures were relatively low compared to historical levels, there were increases in both the rates of input price and output charge inflation.

The rise in cost burdens was mainly due to higher fuel, material, and shipping prices.

Consequently, companies increased their selling prices, with inflation rates reaching their highest point since the beginning of the fourth quarter.

Looking ahead, business confidence across Filipino manufacturers remained strong.

“Though strengthening only fractionally since November, the degree of confidence lifted to a four-month high. Hopes of improving demand conditions and plans for increased marketing campaigns boosted optimism,” S&P Global said.