Manufacturing activity continues improvement in November

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Metro Manila (CNN Philippines, December 1) — Operations of the Philippine manufacturing sector emerged stronger this November as factory owners reported an expansion in new orders, IHS Markit’s latest survey showed.

The United Kingdom-based information services provider said the country’s Manufacturing Purchasing Managers Index (PMI) —an indicator of the manufacturing sector's economic health — had a value of 51.7, up from the 50.0 threshold separating expansion from contraction.

Higher than the 51.0 value recorded in October, the newest PMI outturn is now the highest since March’s 52.2 reading.

"Latest PMI data continued to signal a recovery in operating conditions in the Philippines with the headline figure at an eight-month high. Supporting this was an expansion in new orders, which was the first uptick since the end of the opening quarter of the year,” said IHS Markit economist Shreeya Patel.

The survey cited higher client numbers, increased foot traffic, and general improvement in customer demand as primary drivers of growth.

Despite tallying more orders, survey participants observed a “fractional” decline in production, according to IHS Markit.

“While stronger sales helped some businesses to expand their output, others mentioned delays receiving inputs, as well as material and staff shortages constrained capacity,” read the company’s report.

Vendor performance also deteriorated during the month due to traffic issues, port congestions, and difficulties sourcing materials, it added.

Manufacturers likewise observed a slower decline in their workforce numbers, mainly citing voluntary resignations for the drop and noting difficulty in finding skilled replacements.

“Despite this, backlogs of work fell sharply, and at a quicker pace. Anecdotal evidence suggested that firms were able to keep up with demand as employees worked overtime to complete existing orders,” said IHS Markit.

Companies also ramped up purchasing activity this November due to the rise in new orders, the survey found, also noting that expected demand improvement encouraged them to increase input stock levels.

In terms of prices, input costs also went up during the month amid higher costs of raw materials, transportation and energy, according to IHS Markit.

“The rate of increase quickened to the sharpest since March 2018 and was among the steepest in almost six years of data collection,” it said, adding the selling prices of firms also went up faster as they pass on higher expenses.

IHS Markit also found that factory owners remain confident on the improvement of their outputs over the course of 2021, adding their degree of optimism had “improved to a 21-month high” as survey participants bank on a return to normalcy and greater demand.

“That said, although sentiment was higher than the average for 2021 so far, it was below the long-run series average suggesting concerns regarding the pandemic still persist,” said IHS Markit.