PH manufacturing PMI sustains growth

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The Philippines’ manufacturing PMI continued to expand in December, albeit at a slightly slower pace from the previous month, on the back of growth in both output and new orders.

Results of an IHS Markit/Nikkei poll released on Tuesday showed a seasonally adjusted Purchasing Managers’ Index of 54.2 for the month, lower than November’s 54.8 and the 55.7 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.

“The Philippines manufacturing economy finished the year with its best quarter for 2017, setting the scene for stronger growth as the country moves into next year,” IHS Markit economist Bernard Aw said.


While growth in output and new orders also eased in December compared to November, the expansion remained above 2017 averages.

Respondents often cited greater client demand for solid new order book growth but there were also some who mentioned pre-emptive purchases in anticipation of price hikes.

Domestic demand was a primary driver as foreign sales barely increased in December, with survey data showing the weakest expansion in new export orders in four months.

Firms, meanwhile, added more workers for a third straight month in December, which helped them keep on top of additional workloads.

Work backlogs subsequently fell, stretching the current trend of lower work outstanding to 22 months, though the rate of decline was the slowest since October 2016.

High output and increased sales led manufacturers to continue raising input purchases, which in turn placed more pressure on supply chains.

Suppliers struggled to meet delivery deadlines, with December data indicating the steepest deterioration in vendor performance since the survey’s inception in January 2016.

Greater acquisitions of inputs helped boost inventories. Stocks of purchases rose further at the end of the year while higher production saw inventories of finished products increase for a third straight month.

On the price front, meanwhile, Filipino manufacturers continued to face strong inflationary pressures.

Despite a slower rate of increase in both input costs and output prices, latest inflation rates remained above their historical averages.

A host of factors were blamed for higher costs, including increased raw material prices, a weaker exchange rate, customs tax hikes and supply shortages.

“As these pressures subside, the likelihood is inflation will remain within the central bank’s target of 2 percent to 4 percent in 2018,” Aw said.

Meanwhile, Aw said other survey indicators point toward a strong start to 2018 for the sector.

Businesses were more optimistic about the 12-month outlook in December, the survey found, with the Future Output Index improving to a four-month high.

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