PH factory output slips to 5-mo low

Credit to Author: Anna Leah E. Gonzales| Date: Mon, 02 Dec 2019 17:33:11 +0000

GROWTH in the country’s manufacturing sector “softened” in November as production and new orders increased at a weaker pace and employment levels failed to improve, according to an IHS Markit survey.

Results of the poll released on Monday showed that the seasonally adjusted manufacturing Purchasing Managers Index (PMI) slowed to 51.4 last month from 52.1 in October. The latest figure is also the lowest since June’s 51.3.

The PMI represents the weighted average of new orders, output, employment, suppliers’ delivery time and stocks. Readings above 50 signal an expansion; below that, a contraction.

“Growth softened to a modest pace in the Philippine manufacturing sector in November as firms noted the weakest rise in factory orders since August,” IHS Markit economist David Owen said in a statement. “[T]his led companies to hold back on hiring plans, signaling reduced pressure on capacity as output growth slowed.”

“Meanwhile, stocks continued to rise, but at a notably subdued rate. At the same time, manufacturers looked toward 2020 with improved optimism as growth plans began to take shape. This brought output expectations to [its] strongest since February,” he added.

The output index fell to its weakest since April, indicating that manufacturing firms saw growth losing momentum.

While domestic demand was strong, external markets experienced difficulties, with new foreign orders falling for the fifth time in the last six months.

Weaker sales growth led firms to hold off on their employment plans, with the latest data signaling unchanged payroll numbers from October.

“This followed four successive months of job creation. While some companies hired new workers due to greater output requirements, others reduced labor or chose not to replace voluntary leavers,” IHS Markit said.

It also said manufacturers had cited traffic issues as one of the reasons for the deterioration in vendor performance.

In terms of prices, input costs rose solidly because of the increase in prices of raw material, which partly resulted from higher demand for inputs.

Despite this, IHS Markit noted an improved manufacturing outlook last month.

“The level of sentiment rose to its highest in nine months, as companies noted that plans for 2020, such as new products and factory openings, led to boosted optimism for the future,” it said.