Material shortages clipped local factory output in March

Philippine manufacturing output contracted for the first time since July 2022 as factories grappled with material shortages that hampered production.

A monthly survey of 400 companies showed the Philippines’ Purchasing Managers’ Index (PMI), a gauge of the manufacturing sector’s health, was broadly unchanged at 50.9 in March from 51.0 in February, S&P Global said in a report released on Monday.

While the latest reading settled above the 50-mark separating growth from decline, Maryam Baluch, economist at S&P Global Market Intelligence, said the sector’s performance at the end of the first quarter was a “mixed picture.”

In turn, business confidence on output growth over the coming year sank to a near four-year low.

“The downturn [in demand] came despite firms in general recording sustained demand for goods,” Baluch said.

But there were good streaks of data that came out of the new PMI report.

S&P said new orders continued to expand last month, although the rate of growth “moderated” from February.

This sent firms rebuilding their inventories of both pre- and postproduction materials to meet the uptick in demand. At the same time, job creation was recorded for the second straight month and was the strongest in one-and-a-half years.

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Despite the inadequate supply of materials, companies polled said their suppliers “moderated” hikes in their charges to boost sales. This, in turn, prompted factories to reduce their selling prices for the first time in nearly four years, although the decline was minimal.

But S&P’s Baluch said local factories are still less upbeat.

“Firms were concerned that increased market competition would limit growth prospects. However, hopes of demand conditions domestically and globally strengthening continued to buoy confidence levels,” she said. INQ