The Philippine manufacturing sector is in the pink of health and is positioned to post stronger growth this year, based on the country’s Purchasing Managers’ Index (PMI) at the end of 2017.
On Tuesday regional business media organization Nikkei and international think tank IHS Markit announced that the Philippines’s PMI was at 54.2 in December, slightly lower than November’s 54.8.
But IHS Markit principal economist Bernard Aw said the December level still signals that the local manufacturing sector is in the pink of health.
“The Philippine manufacturing economy finished the year with its best quarter for 2017, setting the scene for stronger growth, as the country moves into next year. Output and new orders maintained marked growth rates in December. Domestic demand stood out as a key driver for manufacturing activity, as export growth remained subdued,” Aw said.
The PMI is a composite index, calculated as a weighted average of five individual subcomponents. Readings above 50 signal an improvement in business conditions on the previous month, while readings below 50 show deterioration. “Other survey indicators point toward a strong start to 2018 for the sector.
Business expectations about output in the year ahead strengthened to a four-month high, while firms increased labor capacity and purchasing activity further during December,” he added.
The Philippine manufacturing sector has been the strongest growing industry in the region for two consecutive months since October 2017, owing to strong demand ushered in by the holiday season.
Data on the PMI of the rest of the Asean for December have yet to be released. Aw also dispelled concerns on inflation for the manufacturing sector, expressing positive outlook for prices in 2018.
“The PMI’s gauge of input prices, which exhibits a strong relationship with official consumer inflation data, slowed in December, suggesting headline inflation may have peaked and is likely to turn down from its current three-year high,” Aw said.
“Notably, inflation has been pushed higher by increased oil and food prices, as well as a weak exchange rate. As these pressures subside, the likelihood is inflation will remain within the Central Bank’s target of 2 [percent] to 4 percent in 2018,” he added.