PH factory output grows fastest in Sept

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PHILIPPINE business conditions continued to improve as the country’s Purchasing Managers’ Index (PMI) accelerated in September after slipping a month earlier, according to the latest survey by IHS Markit for the Nikkei Philippines Manufacturing Purchasing Managers Index (PMI).

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The seasonally adjusted PMI in September stood at 57.5, its sharpest growth since January, from 55.3in August when PMI posted its steepest decline.

The PMI is a composite index calculated as the weighted average of five individual sub-components: new orders, output, employment, suppliers’ delivery times, and stocks.

“September’s PMI results pointed to another improvement in business conditions in the Filipino manufacturing sector, as further strong client demand led to greater increases in output and new orders,” according to Nikkei.

“Higher production targets contributed to expansions in both purchasing activity and employment. Meanwhile, output prices and input costs rose at sharper rates,” it added.

New contracts drove the overall improvement in business conditions. A number of firms reported having secured new customers.

Nikkei noted another steep expansion was evident in export orders, but the pace of increase was marginally lower month-on-month.

“Higher new orders led to another solid expansion in manufacturing output during September, with the rate of growth the most marked in the survey’s nine-month history. This contributed to another sharp rise in post-production inventories,” it said.

Having increased production to meet higher demand, companies were encouraged to take on additional workers in an attempt to enhance operating capacity. It helped accelerate rate job creation.

Meanwhile, greater demand resulted in another sharp rise in purchasing activity in September. Input buying has increased every month since the survey’s inception in January, with the latest rate of expansion the strongest in the year-to-date.

“Higher buying activity led to an eighth successive accumulation in stocks of purchases,” Nikkei noted.

The rate of input price inflation accelerated fractionally from the previous month with many panelists citing the depreciation of the Philippine peso against the US dollar as a defining factor.

“Charge inflation followed a similar trend as a number of companies passed on higher input costs to their clients,” Nikkei pointed out.

“All looks positive for goods-producing companies in the Philippines, with strong demand conditions leading to robust growth of both new orders and output,” Alex Gill of IHS Markit, which conducted the survey, said.

While political uncertainty has had an impact on the depreciation of the peso in recent months, the adverse effects of higher import costs will be offset by cheaper exports.

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