By Aubrey Rose A. Inosante, A reporter
PHILIPPINE factory work ended 2024 on a high as December growth was the fastest since November 2017, driven by increased production and new orders, S&P Global said on Thursday.
The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) rose to 54.3 in December from 53.8 last month.
This matched the April 2022 print and was the strongest improvement in operating conditions since the 54.8 reading in November 2017.
A PMI reading above 50 marks an improvement in working conditions, while a reading below 50 indicates a deterioration.
“The Philippine manufacturing sector ended 2024 on a positive note, with further improvement in demand leading to a significant increase in new orders and output,” said Maryam Baluch, economist at S&P Global Market Intelligence, in a report.
The Philippines’ PMI reading remained the fastest among Association of Southeast Asian Nations (ASEAN) member countries in December. It was ahead of Thailand (51.4), Indonesia (51.2) and Myanmar (50.4).
A decline in manufacturing activity was seen in Vietnam (49.8) and Malaysia (48.6).
In its report, S&P Global said output and new orders had a “positive impact” on the Philippines’ PMI reading for December.
“A sharp increase in both new orders and output was reported, supported by strong evidence of strong demand trends, product diversification, and new customer acquisition,” it said.
International markets saw renewed demand growth, leading to the first rise in new export orders in five months, S&P Global said.
The increase in production needs prompted manufacturers to increase purchasing activity, with input purchases rising to the highest rate in nearly two years.
“Continued increases led to a resumption of the pre-production inventory structure, following two consecutive months of contraction,” he said.
S&P Global said retail sales fell sharply in December, although at a slower pace than in November.
“The increase in shopping activity has hampered the chains, causing congestionfic traffic and ports, according to the panelists,” said the statement.
Manufacturers cut staffing levels in December, ending three straight months of hiring.
“While the efficiency in production allowed manufacturers to stay on top of production, it also led to a slight decline in employment, ending a three-month period of job creation. However, this could be a short-term mistake, especially if demand remains strong as expected throughout the year 2025,” said Ms. Baluch.
S&P Global said rising costs of construction materials and suppliers had been passed on to customers, although the data showed easing inflationary pressures.
“December highlighted a decline in inflationary pressures, marking the upward trend seen in November. In fact, cost burdens and exit costs have increased at historically adjusted rates,” said Ms. Baluch.
Manufacturers maintained an optimistic outlook for 2025, although confidence levels fell to a four-month low.
“Firms remain confident that output will rise next year, amid hopes that demand trends will strengthen and plans to launch new products,” S&P Global said.
Chief Economist Rizal Commercial Banking Corp. Michael L. Ricafort said factory activity improved in December due to “higher demand from many businesses/industries during the fourth quarter Yuletide holidays.”
“The rapid manufacturing PMI data can be a bright spot for the Philippine economy that can basically lead to faster GDP (gross domestic product) growth, as one of the leading economic indicators,” he said.
In an email, Pantheon Macroeconomics Emerging Asia economist Miguel Chanco said the Philippines remains the leading producer in the region.
The Philippines’ PMI reading was above the ASEAN average of 50.7 in December. In 2024, the ASEAN PMI reading averaged 51.
He noted that ASEAN’s manufacturing PMI was “weaker than we expected, although the dip in headlines was mainly due to the bloc’s more advanced members hitting a brick wall at the end of last year.”
Mr. Chanco said the ASEAN PMI data suggest that factory activity should remain stable in the near term.
In a separate report, S&P Global said manufacturing firms in the ASEAN region are optimistic about the year ahead, although confidence levels fell to their lowest in eight months.
“Although the outlook for 2025 remains positive, it has decreased slightly. Growth in new regulations remains low and depends heavily on domestic demand, while weak international demand continues to hold back growth,” Ms Baluch said.
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