Philippine factory conditions improve in November


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Philippine factory conditions improve in November

Czeriza Valencia (The Philippine Star) – December 2, 2020 – 12:00am

Domestic manufacturing conditions improved in November, nearing stability as output rises for the first time in six months and job losses slowed, London-based research and data provider IHS Markit said.

The Purchasing Managers’ Index (PMI) compiled by IHS Markit for the Philippine factory sector rose from 48.5 in October to 49.9 in November, settling at just below the 50 neutral value that separates expansion from contraction.

The PMI provides a quick overview of the health of the manufacturing sector based on the weighted average of five indicators: new orders (30 percent weight), output (25 percent), job creation (20 percent), supplier delivery times (15 percent) and inventories (10 percent).

In November, output levels rose for the first time since June, although only marginally, as more businesses reopened. Softer reductions in new orders were also seen during the month as overseas demand increased moderately.

Despite the increase in new orders, job losses persisted but at the slowest pace in nine months. IHS Markit said firms scrimped on hiring to cut costs as they had enough manpower to service new orders.

Firms were also building up their inventories again after stocks of finished goods declined midway into the fourth quarter.

Supply chain disruptions also continued into November, lengthening the delivery times. Port congestions and traffic delays were linked to the steep deterioration in vendor performance.

Most firms raised the prices of their products during the period to cope with higher prices of raw materials and transportation costs. Some, however, lowered prices to boost sales.

Despite the improvement in manufacturing conditions in November, recovery may not be easy due to the still elevated number of COVID-19 cases in the country.

The 12-month outlook for production, however, remained positive as recent vaccine developments raised hope among firms that the pandemic would end next year.

“Nevertheless, the path to recovery may not be smooth. The health of the sector rests on the number of COVID-19 cases and the impact of the virus has on the global economy,” said IHS Markit economist Shreeya Patel.

“Whilst vaccine developments look promising, it is still unclear when restrictions will come to a complete end.”

Within ASEAN, manufacturing conditions in the region stabilized in November as seen in the rise of the headline PMI to 50 in November from 48.6 in October, ending eight months of decline.

Output in the region rose for the first time since January amid a slight uptick in new orders. The rate of job shedding was also the softest in nine months.

“November data provided a small glimmer of positivity with regards to the ASEAN manufacturing sector,” said IHS Markit economist Lewis Cooper.

He noted, however, that amid the still rising number of cases worldwide, the imposition of rougher lockdowns in the region would cause manufacturing conditions to deteriorate anew.

“Moreover, with cases rising across the globe, and some ASEAN constituent countries enforcing tougher lockdowns, we may well see conditions deteriorate again if client demand is stifled by measures and factories ease back on production,” said Cooper.

“Nonetheless, things are beginning to move in the right direction, with the latest data providing a tentative sign that the manufacturing sector may be turning towards a recovery. Heightened uncertainty continues to cloud the outlook, however, and nothing is certain.”


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