GLOBAL headwinds and sluggish demand from China will weigh on the performance of the manufacturing sector, according to Standard & Poor’s (S&P) Global Market Research.
Based on the latest Purchasing Managers Index (PMI), S&P said the country’s composite score in the index dipped to 50.9 in January, the second consecutive month it slowed.
In December 2023, the country’s PMI score was at 51.5 from 52.7 in November last year. The country’s PMI score in January was the lowest since the 50.6 recorded in September 2023.
“The turn of the year revealed a slight weakness in demand conditions, as new orders and output growth eased,” Maryam Baluch, Economist at S&P Global Market Intelligence, said.
“Moreover, looking forward, global headwinds and sluggish demand from external markets, especially China, are likely to weigh on the Filipino manufacturing sector,” she added.
However, S&P said manufacturers remained optimistic that output growth will improve in the next 12 months. This was based on the responses of nearly half the panellists spoken to by S&P.
The data also showed that amid concerns regarding global weakness and declining demand, the sector did not cut employment. This was contrary to the contractions in the past two surveys done by the think tank.
It noted that staffing levels were unchanged. While there were cost constraints and resignations which led to job shedding, this only occurred in “some firms.”
According to S&P, what helped act as a counterbalance on the employment front was that some companies were now more willing to take on additional staff as they expected an increase in new orders.
“On the flipside, other evidence from latest PMI data, such as the rise in buying activity and the building of stocks, indicates that manufacturers anticipate continued growth in the coming months,” Baluch said.
“Additionally, historically subdued inflationary pressures will also assist the sector, as firms seek to price competitively,” she added.
Earlier, the Philippine Statistics Authority (PSA) disclosed that the country’s manufacturing sector posted growth of 1.9 percent in November 2023.
Based on the Monthly Integrated Survey of Selected Industries (Missi), the Volume of Production Index (VoPI) in November 2023 was faster than the annual growth rate of 1.5 percent in October 2023.
However, the sector’s November 2023 performance was slower than the 6.4 percent rate posted in November 2022.
The data showed the manufacture of beverages posted a decline of 11.6 percent. However, this improved from the 34.4-percent decline in October 2023.
The PSA also said the manufacture of transport equipment saw a 17.1- percent annual increase, from 5.8 percent annual increment in October 2023.
Image credits: Nonie Reyes