A Mixed End to 2023 for Philippine Manufacturing Growth Slows Jobs Decline

In December 2023, Philippine manufacturing experienced a moderation in its growth trajectory, with the S&P Global Manufacturing Purchasing Managers’ Index (PMI) falling to 51.5 from November’s 52.7. This marked the lowest growth rate in three months, reflecting a slowdown in new orders and a reduction in employment numbers. However, the Philippine PMI remained above the Association of Southeast Asian Nations’ average of 49.7, indicating a continuing expansion in the sector.

The closing month of 2023 witnessed a slowing pace in factory output, the weakest in three months. Domestic market sales dominated as international demand weakened. New order growth decelerated across sectors, leading to redundancies and a second consecutive month of employment decline, happening at an accelerated rate. Notably, input and output charges increased due to higher costs of fuel, materials, and shipping, forcing producers to elevate their selling prices.

Despite these challenges, the outlook among Philippine manufacturers for the next 12 months remains positive. Confidence in future production growth reached its highest since August, fueled by hopes of increased production and marketing efforts.

Furthermore, the manufacturing sector’s overall performance in January 2023 maintained a positive trend. However, S&P Global Market Intelligence observed that hiring activities remained weak, with only a fractional rise in employment, affected by layoffs and resignations. Despite this, about two-thirds of surveyed panelists anticipated a rise in output over the next year.

January 2023 saw the manufacturing output in the Philippines reaching its highest level in seven months, benefiting from cooling inflation and aggressive monetary policy. This performance was supported by strong domestic demand, lack of COVID restrictions, and new investments and projects, enhancing optimism for the manufacturing sector.

Additionally, easing price pressures in January indicated the effectiveness of the central bank’s aggressive monetary stance. There was a significant increase in output and new orders, demonstrating robust demand for Philippine-manufactured goods. Exports were revived for the first time in 11 months, aided by stronger demand from China and improved international client numbers. Supply chain pressures also eased, thanks to better infrastructure and more vendors, along with lifted port restrictions, improving delivery times.