Manufacturing activity picks up in October 2018

MANILA, Philippines — Manufacturing activity continued to improve in October as factories registered a strong influx of new orders, ramping up production and hiring, according to the latest reading of the Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI).

The headline manufacturing PMI for the country rose to 54 in October from 52 in September, the highest reading in 10 months, indicating stronger growth at the beginning of the fourth quarter.

The latest PMI reading puts the sector well-within the expansionary territory as a reading of below 50 indicates contraction. The headline PMI provides a quick overview of the health of the manufacturing sector based on output, new orders, job creation, inventories, and delivery times.

The new reading also indicates that Philippine factories outperformed those in other ASEAN countries in October.

Purchasing managers who participated in the survey in October reported higher demand for manufactured goods in October, the highest in five months. As a result, factories raised their output sharply and hired more workers to reduce capacity pressures.

Domestic manufacturers also increased input purchasing, but continued to bear the burden of strong cost inflation during the month because of higher prices of raw materials, new excise taxes, and the weaker peso.

To protect profit margins, manufacturers once again raised the prices of their products. Around 22 percent of businesses jacked up the prices at the sharpest rate in survey history, said IHS Markit, the firm that collected data for the PMI.

Purchasing managers also reported longer delivery times for the third month in a row because of the congestion in the port of Manila, longer checks at customs, and recent weather conditions.

IHS Markit economist David Owen said price pressures are expected to linger in the coming months.

“Inflationary pressures led to the sharpest uptick in selling prices seen since the survey began in 2016. Businesses continued to feel the burden of higher raw material costs, the TRAIN Law and a weakening peso. The recent trend suggests that price pressures are unlikely to relent in the coming months,” he said.

Manufacturers, however continue to be optimistic about prospects for the future output because of the present demand.