Factory output rises

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Philippine manufacturers’ October output rose at the slowest pace since January 2016 as production improved modestly compared to a month earlier, the IHS Markit Philippines Manufacturing PMI (purchasing managers index) showed.

Compiled by IHS Markit from responses to monthly questionnaires sent to purchasing managers in a panel of around 400 manufacturers, the report said the PMI stood at 52.1 in October, up from 51.8 in September “to reach the joint- highest reading observed for nine months (level with July), and signalling a moderate improvement in the health of the goods- producing sector.”

“Manufacturers maintained a modest rate of production growth, and one that was broadly in line with those seen in August and September. According to surveyed firms, increased new orders were behind the upturn. However, the rate of output expansion was weaker than the trend for the series (which began in January 2016),” the report said.

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The pace of new order growth improved slightly, with firms reporting a solid increase in demand due to greater client numbers and an improvement in export conditions.

“Sales to overseas clients rose for the first time in five months, albeit only modestly,” IHS Market said.

It added prices paid for input goods continued to rise in October, a solid, albeit notably weaker, hike than the series trend. IHS Markit said firms linked the rise in cost to “higher prices for raw materials, including metals and foodstuff.”

“Reduced input availability was also mentioned as driving overall costs up,” it said.

Selling charge inflation ticked down to the softest rate since the first month of data collection in January 2016.

The report said while a number of firms raised prices due to greater cost pressures, most kept them unchanged in order to maintain a solid inflow of new business.

Despite stronger demand growth, there remained a lack of capacity pressure at factories with firms noting another steep reduction in outstanding business with the rate of depletion accelerated to the fastest since last September.

“As a result, Filipino firms saw little need to raise workforce numbers during October. Latest data indicated a slight increase in employment from September, albeit at the softest pace for three months,” it said.

Input buying meanwhile continued to rise solidly, with higher order book volumes leading manufacturers to purchase greater amounts of raw materials. IHS Markit however noted the rate of expansion dipped slightly to the slowest in six months. Stock levels also increased, though only marginally.

“As with recent months, traffic issues hampered suppliers during October. Lead times increased for the third month in a row, and at the fastest rate so far this year,” it said.

IHS Markit said outlook among manufacturing companies in the Philippines “weakened further, setting a new record low for the survey.”

“While some firms were downbeat, many panelists remained optimistic toward future output levels due to sales growth, new products and store openings,” it said.

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