Growth in the Philippine manufacturing sector softened during November, as output and new orders increased at weaker rates and employment levels failed to improve.
The latest IHS Markit Philippines Manufacturing Purchasing Managers’ Index posted 51.4 in November 2019, indicating a moderate improvement in operating conditions in the goods-producing sector. The headline index was at its lowest level since June’s 51.3, and after falling from 52.1 in October.
The November PMI is, however, still an expansion as a reading above 50 indicates an expansion of the manufacturing sector compared to the previous month; below 50 represents a contraction; while 50 indicates no change.
“Growth softened to a modest pace in the Philippines manufacturing sector in November, as firms noted the weakest rise in factory orders since August. In particular, this led companies to hold back on hiring plans, signalling reduced pressure on capacity as output growth slowed. Meanwhile, stocks continued to rise, but at a notably subdued rate,” said David Owen, economist at IHS Markit, which compiles the PMI survey.
“At the same time, manufacturers looked towards 2020 with improved optimism as growth plans began to take shape. This brought output expectations to the strongest since February,” Owen added.
IHS Markit said cost pressures ticked up at a sharper rate, leading firms to raise output prices modestly. Despite the slowdown, output expectations improved to the highest for nine months amid focused plans for next year.
Total sales continued to rise in November, and at a solid pace, although the rate of expansion was the weakest since August.
While domestic demand was strong, companies saw renewed difficulties in external markets, with new foreign orders falling for the fifth time in six months.
“According to panellists, overseas clients struggled to raise order volumes from October,” IHS Markit said.
In addition, inventories of both pre- and post-production goods rose at subdued rates in November. Higher input buying contributed to a slight rise in stocks, although the rate of expansion softened from October.
Meanwhile, manufacturers continued to highlight traffic issues in November, leading to the fourth deterioration in vendor performance in as many months.
On the price front, input costs faced by Filipino goods producers rose solidly, marking the quickest rate of inflation since February.
IHS Markit said that according to panellists, this was mainly due to increased raw material prices, in part resulting from higher demand for inputs.
“Companies that reported a rise in cost burdens often passed this onto consumers with an increase in selling prices,” it added.