The Philippine manufacturing sector continued its strong performance in November, driven by increased production and demand, despite challenges posed by recent typhoons and rising inflation.
The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) rose from 52.9 in October to 53.8 in November, marking the fifteenth consecutive monthly improvement in the health of the sector.
According to S&P Global, last month’s manufacturing was the most marked improvement since mid-2022.
“November saw the Filipino manufacturing sector ramping up production in anticipation of greater sales in the coming months,” Maryam Baluch, Economist at S&P Global Market Intelligence, said.
“Hiring, purchasing activity and post-production inventories were also raised in preparation. New sales recorded further growth, as demand conditions continued to improve,” she added.
Manufacturers are optimistic about the future, with sentiment reaching its highest level since early 2023. Firms are also hopeful that improving demand conditions and the upcoming election year will support further expansion.
S&P Global said this optimism is reflected in the increased production levels, which expanded at a faster pace in November.
However, the sector is facing some headwinds. Typhoons that made landfall in October and November have led to longer lead times for inputs. The incidence of delays was the most marked since October 2021.
Additionally, inflationary pressures have intensified, with input costs and output charges climbing at their fastest rates in 21 months.
Despite these challenges, Baluch noted that "firms remained optimistic about future output, with hopes that improved demand trends and the upcoming election year will provide a boost to the sector."
The increase in output was also attributed by companies to inventory building. Stocks of finished goods rose for the first time in four months, with the rate of accumulation the joint-fastest in two years. Companies also expanded their capacity further, with job creation recorded for a third straight month.
Michael L. Ricafort, Rizal Commercial Banking Corp. chief economist, added that the increase in the PMI is due to a number of factors, including preparations for the Christmas holiday season, the recent cut in local policy rates, and the lifting of Covid-19 restrictions.
He also noted that the US Federal Reserve's recent rate cuts could help reduce borrowing costs for manufacturers.