PH manufacturing activity expands in November

Manufacturing activity in the Philippines continued to expand in November, propelled by robust demand and growth in new orders and production, S&P Global said.

The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) rose to 52.7 in November from 52.4 in October, indicating a strong improvement in operating conditions, the strongest since February.

“The latest PMI data from S&P Global signaled a further strengthening of the Filipino manufacturing sector in November. Strong demand conditions supported quicker expansions of both new business and output,” Maryam Baluch, economist at S&P Global Market Intelligence, said in a statement on Friday.

A PMI reading above the 50 mark denotes improvement in operating conditions, while a reading below 50 signals deterioration.

In November, the Philippines had the highest PMI reading among Southeast Asian countries with available data, ahead of Indonesia and Singapore (both at 51.7). Meanwhile, Myanmar (48.1), Malaysia (47.9) and Thailand (47.6), and Vietnam (47.3) all recorded contractions during the month.

The headline PMI measures manufacturing conditions through the weighted average of five indices: new orders (30%), output (25%), employment (20%), suppliers’ delivery times (15%), and stocks of purchases (10%).

S&P Global noted the latest PMI survey data showed an uptick in new orders and output.

“Indeed, November saw rates of growth quicken to eight- and ten-month highs, respectively. Firms noted that strong demand conditions both in domestic and foreign markets, new client wins and increased contract work boosted overall sales and in turn spurred greater production,” it said.

On the other hand, purchasing activity declined for the first time in over a year.

“Higher prices for raw materials and concerns of overstocking dissuaded input buying at some firms. However, some businesses continued to purchase inputs amid growing input requirements, thereby helping to offset the overall downturn,” it added.

Manufacturing firms also reported a cut in jobs, ending two months of “tepid growth.”

“The drop came amid continued evidence of spare capacity, as backlogs dropped for the fifth month running and sharply, leading some firms to curtail staffing. That said, a sustained rise in new business encouraged other firms to increase their intake of workers,” it added.

S&P said stocks of purchases expanded but at a modest rate. “Growth in inventories in part stemmed from manufacturing firms holding onto inputs in an effort to become more cost-effective,” it added.

“Meanwhile, vendor performance worsened in November following two months of improvements. The rate at which lead times lengthened was moderate overall, with firms citing material shortages and congestion at ports,” the report said.

“That said, with other price pressures remaining muted, the rate of input price inflation was the weakest recorded in over three years, resulting in a similarly modest uptick in manufacturers’ selling prices,” it added.

Manufacturers were generally optimistic for the next 12 months as almost half of respondents see an expansion in production. “While this marked an improvement since October, confidence levels were still historically subdued,” the report noted.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that improved manufacturing output was due to the “seasonal increase in importation, manufacturing, and other production activities” amid the holiday season.

“Generally better weather conditions in most parts of the country also supported the pick up in manufacturing and overall business activities in the country,” he said in a Viber message.

Easing inflation also helped drive factory production, Mr. Ricafort said.

Headline inflation eased to 4.9% in October from 6.1% in September and 7.7% in the same month a year ago.

The latest inflation print was the slowest pace in three months. However, it marked the 19th straight month that inflation breached the central bank’s 2-4% target band. — Luisa Maria Jacinta C. Jocson