PH manufacturing sector improves in April

DOMESTIC manufacturing saw an improvement in April but the degree of confidence fell to the second-lowest on record, S&P Global reported on Friday.

The headline purchasing managers' index (PMI) — a figure indicating the overall health of the manufacturing sector — was at 53.0 in April, an improvement from the 49.4 PMI in March, which was the lowest in 43 months. Falling above the 50.0 threshold, which separates growth and decline, the month's PMI shows that the sector is in a growth phase for April, unlike the previous month.

“The Filipino manufacturing sector commenced the second quarter of the year on a solid note, experiencing renewed growth in output and new orders, alongside an increased level of purchasing activity. Encouragingly, inflationary pressures also remained contained and historically subdued,” said Maryam Baluch, Economist for S&P Global Market.

The improvement in the sector was mostly driven by expansion in new orders and output, the two largest components of the PMI. For both indicators, growth rates were sharp and at their strongest for the year. Growth in new orders and output was mostly driven by new client acquisitions, and the national and local elections set to be held in the country in May.

International demand for Philippine-manufactured goods, on the other hand, remained largely unchanged for the second consecutive month in April. The seasonally adjusted New Export Orders Index printed slightly below the neutral 50.0 threshold, indicating no change from the previous month.

Manufacturers also increased their purchasing activities at a faster rate this month, given their higher output needs. With this, growth was seen for each of the last 17 months with the most recent increase being strong overall.

Some respondents also noted that they were able to expand their input inventories as a result of increased purchase activity, including instances of bulk buying. For the second consecutive month, stocks were accumulated and the growth rate was somewhat faster.

Finished goods holdings also increased during the month. However, the postproduction inventory gain, which is on its fourth consecutive month, was only marginal and is the weakest in the current growth sequence.

Employment levels also held steady for a second consecutive month. There was another marginal decline in outstanding work levels, which demonstrated that companies were successfully managing their workloads, according to PMI data.

In terms of prices, inflationary pressures were rather low. Cost burdens and output charges both increased, although at historically slow rates. The latter only slightly increased, as a result of some companies absorbing their expenses due to a competitive environment.

Although companies remained hopeful for an increased output over the next 12 months, confidence dropped to the second-lowest level ever recorded in the series history that started in January 2016, only behind the survey-low observed during the start of the pandemic in March 2020. A return to regular output levels in the coming year is also expected, as some respondents said that the temporary boost associated with the upcoming elections would also wane.

“However, companies have shown caution in expanding their workforce numbers, maintaining staffing levels for the second consecutive month. Furthermore, confidence within the sector has declined to its second-lowest in the series history. Some respondents indicated that the rise in activity during April was partially influenced by the upcoming elections, suggesting that post-election, customer demand may be less buoyant,” Baluch added.