Phl factory conditions peak in October
Philippine manufacturing conditions improved in October as production expanded alongside a solid upturn in new orders, according to the latest IHS Markit Purchasing Managers’ Index (PMI).
The headline manufacturing PMI for the Philippines rose to 52.1 in October from 51.8 in September, the highest in nine months, and bucking the downtrend in the ASEAN region.
The headline PMI provides a quick overview of the health of the manufacturing sector based on the weighted average of five indicators: new orders (30 percent weight), output (25 percent), job creation (20 percent), supplier delivery times (15 percent) and inventories (10 percent).
A reading of above 50 in the index indicates improving business conditions while that below 50 indicates deteriorating conditions.
The market intelligence firm said both output and new orders rose at faster rates in October because of stronger demand and improvement in export conditions.
As such, firms stepped up the purchase of inputs to cope with increased orders but noted the increase in supplier delivery times because of traffic issues.
Firms continued to raise prices in October – although at the slowest pace since January 2016 – citing higher prices for raw materials such as metals and foodstuff.
“While a number of firms raised prices due to greater cost pressures, most kept them unchanged in order to maintain a solid inflow of new businesses,” said IHS Markit.
Despite stronger demand, factories are able to keep up with production requirements as seen in the lack of capacity pressure. Because of this, firms saw little need to increase the number of workers.
“Posting at 52.1 in October, the IHS Markit Philippines Manufacturing PMI signalled little change in the rate of improvement in operating conditions from September. Production expanded at a slightly quicker rate, alongside a marginal uptick in the pace of new order growth. On the other hand, employment rose at a slower rate, while stock of purchases grew to the least extent for three months,” said IHS Markit economist David Owen.
“A stand-out from October data was a further fall in the pace of output charge inflation, which reached the weakest since January 2016. Despite a solid rise in cost burdens, many firms looked to keep prices unchanged in order to maintain a strong market environment,” he added.
Business sentiment among Filipino manufacturers remained gloomy as of October, but purchasing managers who responded to the survey still expressed optimism for the year ahead.
“Business expectations dropped to the lowest in the series history. However, with a good proportion of firms still expecting activity to rise in the year ahead, the overall outlook remained positive,” said Owen.
Within the ASEAN region, manufacturing conditions fell for the fifth consecutive month as output contracted, new business declined and job loss persisted.
The headline PMI for ASEAN fell to 48.5 in October from 49.1 in September.
“The ASEAN manufacturing sector contracted further in October, with the headline PMI slipping to a near four-year low. Businesses signalled the steepest decline in output since November 2015, whilst new orders fell for the third month in a row,” said IHS Markit economist Lewis Cooper.
“Amid weaker demand conditions and lower production requirements, firms cut employment for the fifth successive month, with the rate of job shedding quickening since September.”
Among ASEAN economies, only Myanmar and Philippines registered improvements in manufacturing conditions in October.
“Despite turbulent conditions, ASEAN manufacturers remain optimistic regarding output expectations for the next year. That said, sentiment weakened to the lowest since February amid an increasingly uncertain outlook.”