Factory activity contracts in September

Manila, Philippines — Manufacturing activity in the Philippines dipped into negative territory in September for the first time in five months, according to S&P Global. The Philippines' Manufacturing Purchasing Managers' Index (PMI) fell to 49.6 in September, marking the first contraction in the sector's operating conditions since April.

This number signals a decline from the previous month, with a reading above 50 indicating growth. The PMI, based on a survey of approximately 400 manufacturers, tracks new orders, output, employment, suppliers' delivery times, and stock levels of purchases.

Sian Jones, a principal economist at S&P Global Market Intelligence, noted that Filipino manufacturers faced significant challenges in September. The impact of high oil prices, strong international competition, and weak demand led to a drop in output, new orders, and employment, all slipping into contractionary territory. Output posted its steepest decline since November of the previous year, as manufacturers received fewer orders and encountered strong competition from abroad.

To cope with declining production requirements, firms reduced their workforce slightly. Additionally, manufacturing companies cut input purchases and stock levels due to delays in suppliers' lead times. Higher oil prices caused transportation delays and logistics issues, stretching suppliers' lead times to one of the longest in two years. Despite these challenges, efforts to protect margins resulted in a sharper rise in selling prices.

While companies anticipate a rebound in output over the coming year, optimism about the sector's prospects was the weakest since January. Manufacturers continue to grapple with issues related to pricing power and international competition. Jones emphasized that the viability of continuing to absorb rising costs will be a crucial factor in driving customer demand in the months ahead.