PH manufacturing PMI hits 1-yr high
Credit to Author: Mayvelin U. Caraballo, TMT| Date: Mon, 03 Feb 2020 16:25:34 +0000
The Philippine manufacturing sector strengthened in January, with the Purchasing Managers Index (PMI) rising to a one-year high, the latest IHS Markit survey showed.
Results released on Monday revealed the indicator rose to 52.1 from 51.7 in the previous month. The figure is the highest since the 52.3 recorded in January last year.
The PMI takes into account new orders, output, employment, suppliers’ delivery time, and stocks. Readings above 50 signal an expansion; below that, a contraction.
In a report, IHS Markit said the latest PMI signaled a moderate improvement in operating conditions at goods-producing firms.
“Whilst some businesses were notably affected by the Taal Volcano eruption in January, for the most part, the Philippine manufacturing sector continued to grow in January,” IHS Markit economist David Owen, meanwhile, commented.
IHS Markit stressed some firms noted the Taal Volcano eruption in early January limited their output, although this only partly dented overall growth.
“Operating conditions improved at the joint-strongest pace for a year, with production increasing moderately amid stronger demand for goods,” Owen added.
IHS Markit underscored that quicker rise in new orders and the beginning of new contracts supported production levels to grow at a notably stronger pace from the previous month.
Meanwhile, manufacturing new orders continued to rise solidly, with panelists commenting on stronger demand from both domestic and foreign customers, it added.
“In particular, export sales have now risen in three out of the past four months, signalling an improving trade climate as US-China relations appear to brighten. If this is sustained, sales growth could strengthen further this year,” Owen, for his part, acknowledged.
IHS Markit also said greater output growth fed through to a stronger rise in purchasing activity at the start of the year, as firms noted higher input requirements since December.
The rate of growth has been the fastest since August. As a result, stocks of purchases grew solidly. By comparison, stocks of finished goods expanded only marginally, it continued.
But hiring activity remained subdued, despite the upturn in output and new orders, IHS Markit added.
In fact, it elaborated that job numbers decreased for the first time in seven months, after rising only slightly at the end of 2019.
Several companies also mentioned not replacing workers that had resigned, offsetting firms that hired additional labor. Nevertheless, volumes of outstanding work continued to fall, IHS Markit also said.
On the other hand, Owen emphasized “one clear issue heightened by the eruption was road traffic, which has disrupted delivery times in each of the past six months.”
As a result, lead times lengthened at the fastest rate for over two years, extending the current run of deterioration in vendor performance that began last August, IHS Markit explained.
Meantime, it said selling charges rose at a quicker pace in January as manufacturers increased their charges in response to higher prices for raw materials, including oil and foodstuff.
The rate of output price inflation was the sharpest in seven months, with input costs also rising at a faster pace, IHS Markit also highlighted.
Finally, it said the outlook among businesses for output in 12 months’ time improved in January as the degree of optimism was the second-strongest in eight months.
Explaining this, Owen noted the government’s “Build, Build, Build” infrastructure program is “clearly an important project for manufacturers, with several pinning confidence around future output onto improved traffic conditions.”