BUSINESS for factories in the Philippines bared “marginal” improvement in February, according to the latest monthly monitoring by IHS Markit for Nikkei, Inc. that showed manufacturing growth easing for the third straight month by the second-slowest pace since the country survey began in January 2016.

The seasonally adjusted Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI) slipped to 50.8 in February from January’s 51.7, “signalling only a marginal improvement in the health of the sector.”

A PMI reading above 50 suggests improvement in business conditions compared to the previous month, while a score below that signals deterioration.

The manufacturing PMI — a composite index designed to provide a snapshot of the health of the manufacturing sector each month — is composed of five sub-indices, with new orders having the biggest weight of 30%, followed by output (25%), employment (20%), suppliers’ delivery times (15%) and stocks of purchases (10%).

“The latest reading was the joint second-lowest in the survey history,” read the report.

February’s level matched that of September last year and was also the slowest in five consecutive months.

The latest data, collected on Feb. 12-21, showed faster increases in output and new orders that were offset by “the first drop in staffing levels since September 2017.”

“Filipino manufacturing firms recorded a further rise in output during February. The rate of expansion picked up from January, but remained modest overall,” the report said of output, adding that new orders’ “pace of growth was solid, up from the previous month.”

Foreign demand remained subdued, with export sales falling for a second straight month. The report said exports’ “degree of contraction was slightly quicker than recorded in January,” with those surveyed blaming a strong dollar and low overseas demand.

In February, moreover, “the rate of job losses was the fastest in the survey history.”

The report said that managers surveyed referred generally to workers who resigned, “though some mentioned layoffs as part of efforts to cut costs.”

The increase of prices of production inputs “surged to the greatest in the survey history,” read the report that was e-mailed to journalists on Thursday — a day after the central bank said it expected the overall hike in prices of widely used goods and services to have clocked 4-4.8% in February, potentially the fastest clip in more than three years or since October 2014’s 4.3%.

“Companies mainly blamed new excise taxes, higher commodity prices, such as oil, plastics and paper, supply shortages and a weak peso for increased input costs,” the report noted, even as “February data showed tentative signs of recovery in demand after new excise taxes” — under the first of up to five tax reform packages enacted into law in December last year as Republic Act No. 10963 and which took effect on Jan. 1 — “reportedly restricted order book growth at the start of the year.”

“Survey data suggested that the effects of the new excise taxes continued to be felt on the price front. Inflationary pressures intensified during February… The combination of higher prices for raw materials (such as oil, plastics and paper), a weaker exchange rate and new excise taxes were the main drivers for sharp cost increases.”

The report also noted that while “business confidence remained elevated” in the face of higher sales forecasts, it “dipped to the lowest in the survey history.”

“Growth in the Philippines manufacturing economy lost further momentum in February, according to the Nikkei PMI data, setting the sector on course for the weakest quarter in the survey history,” the report quoted Bernard Aw, IHS Markit’s principal economist, as saying.

“…[w]hat’s particularly concerning was the tighter squeeze on profit margins as inflationary pressures built rapidly to survey-record rates,” he noted.

“While the influence of tax reforms is expected to fade in coming months, price pressures could still become more entrenched on rising imported inflation, which will add to calls for the Bangko Sentral ng Pilipinas to raise interest rates.”

Sought for comment, Trade Secretary Ramon M. Lopez cited seasonal factors for the latest Philippine PMI reading.

“At the macro level, manufacturing growth continues to stay relatively strong,” Mr. Lopez said in a mobile phone message, describing February’s PMI dip as “minimal movement” and the reading itself as “still a healthy number”.

“It is also partly seasonal — normally lower in the first quarter — after the ramp-up in manufacturing volume during the fourth quarter [in time for the Christmas holidays] and with inventories spilling over in the first quarter.”

Mr. Lopez also said that February’s dip “can be partly due to the adjustment process taking place as consumers and manufacturers assess their consumption and production patterns given the recent change in our taxation system.”

“This is expected to be temporary.” — with inputs from Janina C. Lim

WASHINGTON — Financial markets barely batted an eye on Tuesday when Jerome Powell’s first public statement as Federal Reserve chief saw daylight, interpreting it as a steady-handed commitment to the US central bank’s policy of gradual interest rate increases.

The calm evaporated about a couple of hours later, at 10:42 a.m. EST (1542 GMT), when Mr. Powell, testifying before a US House of Representatives committee, struck a bullish, and personal, tone on the strength of the economy.

US bond yields jumped as investors raised their bets for four rate increases this year, rather than the three that Fed policy makers projected in late December, and began asking one key question: Is a hawk or a dove now running the Fed?

“The message coming from the written portion of the testimony did not signal any change,” analysts from Barclays wrote on Tuesday, drawing a contrast with Mr. Powell’s live remarks that “point to a risk of a steeper policy rate path.”

Fed policy makers consider their public statements an important tool in shaping public perceptions and, in doing so, making monetary policy more effective.

Fed chiefs try to avoid off-the-cuff remarks that cause impromptu repricing, preferring to hew close to their job of representing the views of the Fed’s rate-setting committee and avoiding disclosing much about their personal opinions.

Veteran Fed analysts were split over whether Mr. Powell had broken that unwritten rule in his remarks, which came just weeks after he took over from Janet Yellen.

“The tone of the testimony was definitely NOT hawkish,” said Cornerstone Macro economist and former Fed staffer Roberto Perli, who emphasized that Mr. Powell’s written comments might be read as a willingness to allow the economy to run hot in order to boost inflation to the Fed’s two percent target on a sustained basis.

“Mr. Powell more confident on growth, putting 2018 dots in play,” is how JP Morgan’s Michael Feroli summed up the day, referring to the quarterly “dot plot” of projected interest rates that Fed policy makers submit.

Mr. Feroli argued that Mr. Powell’s “modestly hawkish” appearance in Congress strengthened the chance that policy makers’ rate outlook would rise when the central bank issues its next set of economic projections next month.

Traders in short-term interest rate futures were shading to the hawkish interpretation on Wednesday, betting squarely on rises in borrowing costs at the Fed’s policy meetings in March, June and September, and putting a high likelihood of a fourth increase sometime in 2018.

The greenback strengthened to a five-week high on the prospect of tighter monetary policy.

Before Mr. Powell’s testimony, investors had seen the Fed as likely to wait until December before raising rates a third time, if indeed it chose to do so at all.

The market moves, however, were hardly dramatic or unprecedented.

Former Fed chief Ben Bernanke famously set off a global bond rout — the “taper tantrum” — in 2013 when he indicated the central bank was about to scale down the bond buying program it began to fight the 2007-2009 financial crisis.

In 2014, at her first press conference as Fed chief, Ms. Yellen jostled markets when she said the central bank could raise interest rates around six months after ending its bond-buying program.

The Fed’s first post-crisis rate increase came in December 2015, more than a year after it ended the bond-buying.

Mr. Powell’s comments on his personal outlook “was basically like him saying, ‘my dot is going up,’” said Tim Duy, an economics professor at the University of Oregon, in contrast to Mr. Bernanke and Ms. Yellen who felt they should never reveal their own “dots.”

The current Fed chief will have a chance to clarify his views when he goes before a Senate panel on Thursday. Mr. Powell may try to stick closer to the script set out in his testimony in which he pledged to gradually raise rates while preventing the economy from overheating. — Reuters