DOMESTIC factory activity remained positive at the start of 2024 but slowed for a second month running, S&P Global Market Intelligence reported on Thursday.
The manufacturing purchasing managers' index (PMI) fell to 50.9 in January, down from December's 51.5 that had eased from the prior month's 52.7. PMI readings above 50 point to growth, while those below indicate a contraction.
"A cooldown in underlying demand trends resulted in only a slight uptick in the intake of new orders. Moreover, output growth also lost momentum," S&P Global noted.
Due to reduced demand, particularly from abroad, factory orders rose the slowest in the past five months.
"The turn of the year revealed a slight weakness in demand conditions, as new orders and output growth eased," S&P Global economist Maryam Baluch said.
"Moreover, global headwinds and sluggish demand from external markets, especially China, are likely to weigh on the Filipino manufacturing sector," Baluch added.
Despite slower orders and output, S&P Global said that Philippine manufacturers had purchased more inputs for production, mostly expecting stronger sales in the coming months.
Buying activity increased for a second straight month in January to its strongest in six months.
Despite ongoing challenges in vendor performance due to material shortages and port congestion, companies also managed to increase their purchase stocks in January.
Pre-production inventories saw a fourth consecutive month of growth, aligning with the survey average.
Finished goods stocks, meanwhile, rose for the first time in three months as companies worked through backlogs, allowing them to build up their inventories.
As for employment, staffing levels remained unchanged after contracting for two consecutive months.
Job shedding persisted at some firms due to cost constraints and resignations, but some firms offset this by being more willing to hire in anticipation of new order growth.
Inflationary pressures were historically low and softened at the beginning of the year. Output charges increased at one of the slowest rates since the series started in January 2016.
Baluch said subdued inflationary pressures would assist the sector as firms move to price competitively.
Manufacturers generally remained optimistic, with almost half of respondents anticipating output growth in the next 12 months.
"Firms remained positive overall in their outlook, despite confidence easing to a three-month low and registering below the long-run average," S&P said.
"Hopes of improved underlying demand conditions largely underpinned expectations."
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