EDITORIAL

Manufacturing index shows PH economic growth is real

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How can the public check whether the Philippine economy is truly growing as many analysts and media organizations have lately been reporting?

Could the contrary be true, as the yellow cult and the opposition are saying: that this is “fake news”? They contend that the Duterte administration’s strategy of “Build, Build, Build” means “borrow, borrow, borrow,” which will ultimately saddle the nation with a mountain of debt?

The naysayers, it turns out, cannot be more wrong. The country’s economic surge is real.

Perhaps the most revealing and reliable check is the purchasing managers index, or PMI, because it has been the most reliable measure of business activity in a national economy since its creation in 1948.


According to the IHS Markit-Nikkei survey, the Philippines’ manufacturing PMI rose to its highest level so far this year in November, as it was buoyed by solid domestic demand.

The results of the purchasing managers survey released on Friday showed a seasonally adjusted PMI of 54.8 for the month, up from October’s 53.7. It was still lower compared with the 56.3 posted a year earlier.

The PMI is a composite index representing the weighted average of five sub-components: new orders, output, employment, suppliers’ delivery time and stocks. Readings above 50 signal an expansion while readings below 50 signal a contraction.

Survey data showed production had expanded at its fastest rate since May’s 54.3, supported by the largest rise in new orders recorded in a year.

Anecdotal evidence suggested that strong economic conditions, promotional activities and greater client demand had continued to sustain order book growth.

While higher foreign demand contributed to the expansion, the domestic market remained the key driver as growth in new export orders was well below that of total new business inflows.

In response to greater production demand, the survey found that firms had raised staffing levels for a second month running in November.

Additional manpower enabled companies to adjust to increased workloads, resulting in a further decline in backlogs. Improved production processes and sub-contracting also contributed.

Factories also stepped up purchasing activity to meet current and future demand, with the rise in buying levels the highest since December last year.

Firms also said that they were replenishing stocks, as well as building up buffers in anticipation of higher demand.

Greater output also led to an accumulation in post-production inventories, the survey found.

On the cautionary side, there were signs that inflationary pressures remained strong. Survey data indicated that firms continued to face sharp cost increases, with input price inflation inching up to the highest since March.

Rising costs were commonly associated with higher prices paid for imported raw materials, with demand for inputs exceeding supply.

To protect profit margins, firms raised selling prices to pass on higher costs to their customers.

“A further rise in global raw material costs, combined with a weak peso, will generate an unwelcome tightening of businesses’ profit margins,” IHS Markit economist Bernard Aw said.

But that said, there can be no denying the Philippine economic upturn. Indications suggest the upturn will gather pace in December.

“The PMI suggests the strong growth momentum in the Filipino economy has some way to go,” Aw said.

So there you are: the naysayers are wrong about the economic expansion. It is not fake news. It is the real thing.

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