Philippine manufacturing PMI bounces back to 50.1 in October

Philippine manufacturing activity rebounded in October, despite a further drop in new orders and output, according to S&P Global.

The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) improved to 50.1 in October, a turnaround from 49.9 in September.

A PMI reading above 50 denotes better operating conditions from the preceding month, while a reading below 50 shows a deterioration in operating conditions.

S&P Global noted that the latest PMI reading indicates “broadly stable” operating conditions.

Maryam Baluch, economist at S&P Global Market Intelligence, said the Philippine PMI reading in October reveals a “mixed picture.”

“The two largest segments, new orders and output, indicated further declines. Additionally, fresh contractions were observed in new export orders and purchasing activity, highlighting underlying demand conditions,” she said.

S&P Global noted that output and new orders “have now failed to record any growth for a second consecutive month, a trend not seen in over four years.”

“The decline in output was closely associated with falling new orders, which panelists linked to adverse weather conditions and the end-of-life status for certain products,” it said, adding that the pace of contraction slowed month on month.

S&P Global said new factory orders “fell at a stronger rate” in October, amid a “sluggish demand climate, with clients often putting orders on hold.”

“In addition, new export orders fell for the first time since May and at a solid pace which was the most pronounced for a year. Companies reported weaker demand from international clients,” it added.

S&P Global said the sharp drop in new orders led manufacturing firms to scale back their purchasing activity. This was the first decline in purchasing activity in nearly two years.

“However, according to anecdotal evidence, last-minute cancellations of orders meant that both pre- and post-production inventories recorded marginal increases. The latter registered a fresh uptick, marking the first expansion in three months,” it said.

Delivery times for inputs also lengthened in October, it said.

S&P Global said October marked a “further alleviation of underlying cost pressures.”

“The rate of input price inflation was modest and the weakest in three months. However, where goods producers reported higher prices, this was attributed to rising supplier and material costs,” it said.

Ms. Baluch said Filipino manufacturers also offered discounts in October to stimulate demand in a subdued market.

“Charges levied for Filipino manufactured goods fell for the first time in 19 months. The rate of decrease was marginal but the strongest since April 2020,” S&P Global said.

Business confidence also improved, nearing August levels, as manufacturers anticipated stronger output and strengthening demand trends” over the next 12 months.

“On a more positive note, manufacturers grew more optimistic about their growth prospects for output in the coming year. Companies also continued increasing their workforce numbers, with the latest rise in staffing numbers the strongest in three months,” Ms. Baluch said.

Ms. Baluch said the manufacturing sector remained in sluggish territory for most of the second half.

“Whether it can see a notable recovery in performance in the coming months will depend greatly on efforts to stimulate consumer demand,” she said.

S&P Global Marketing Intelligence Economics Associate Director Jingyu Pan said Philippine factory output in October showed that conditions are stabilizing.

“We have the output index falling at a less pronounced, in fact, very marginal pace. I think that’s a positive sign,” she said in an interview on Money Talks with Cathy Yang on One News on Monday.

However, Ms. Pan partly attributed the decline in output to a series of earthquakes in Cebu, a key electronics manufacturing hub, which damaged some business facilities.

Global trade tensions are expected to weigh on new export orders, with subdued demand already seen in October.

“I think, reflecting the kind of worries we had in terms of trade tensions coming through to actually impact the manufacturing economy in a more pronounced phase, especially now that as we enter the final quarter of the year with the tariffs settled in. I think that is something that we have to watch,” she said.

The US implemented the 19% tariff on Philippine-made goods on Aug. 7.

Better weather conditions may have also helped lift the Philippine manufacturing activity in October.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said factory activity shifted to expansion mode partly due to better weather conditions followed by two months of adverse weather and earthquake disruptions.

“(This is) also partly due to the positive effects of the local policy rate cuts that reduced borrowing costs for some local manufacturers,” he said in a Viber message.

In the coming months, Mr. Ricafort warned that political noise could dampen manufacturing activity, especially among firms linked to infrastructure supply chains. — Aubrey Rose A. Inosante, Reporter