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Economy

November PMI jumps to 8-month high

By Jenina P. Ibañez, Senior Reporter

PHILIPPINE MANUFACTURING activity rose to an eight-month high in November, as new orders increased for the first time since March, IHS Markit said on Wednesday.

The Philippines Manufacturing Purchasing Managers’ Index (PMI) rose to 51.7 last month from 51 in October, the highest since the 52.2 in March.

A reading above 50 indicates improving conditions for the manufacturing sector versus the previous month, and below the threshold means deterioration.

“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,” Shreeya Patel, economist at IHS Markit, said.

This also signaled the third straight month of growth after the PMI slid to 46.4 in August as factories and businesses shut due to the two-week strict pandemic lockdown in the capital.

PMI is the weighted average of five sub-indices: new orders (30%), output (25%), employment (20%), suppliers’ delivery times (15%) and stocks of purchases (10%).

IHS Markit said Philippine manufacturers saw new orders jump for the first time since March, thanks to higher client numbers, rising footfall, and improved customer demand.

“The rate of growth was subdued in the context of the series history, however,” IHS Markit said.

Output declined for an eighth straight month, but IHS Markit said it was only “fractional.” However, businesses flagged delays in receiving inputs, while material and staff shortages hampered capacity.

“Traffic issues, port congestions and difficulties sourcing materials influenced another deterioration in vendor performance during November. The extent to which lead times lengthened was marked, but eased during the month,” IHS Markit said.

The workforce headcount also fell at the softest pace in four months, as businesses found it hard to find skilled replacements after voluntary resignations.

As new orders went up, companies increased buying activity on expectations that demand will continue to improve.

“Stockpiling and efforts to boost production were a key theme in the latest release, but supply-side issues and the lack of availability of raw materials weighed on production,” Ms. Patel said.

Philippine manufacturers are confident that output will continue to improve, with optimism rising to a 21-month high.

“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,” IHS Markit said.

Ms. Patel also flagged the “low” vaccination rate as one of the sector’s “largest threats.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said easing lockdown restrictions have allowed for the reopening of more sectors.

“Manufacturing also got a boost in view of the preparations in terms of high production for the Christmas holiday season, which accounts for a significant share of yearly sales for many businesses/industries, including those in the manufacturing sector,” he said in a Viber message.

“Further measures to reopen the economy into the Christmas holiday season and in preparations for the May 2022 elections in terms of election-related spending and increased infrastructure spending would also benefit the local manufacturing sector, going forward.”

ASEAN PMI SLIPS
In a separate report, IHS Markit said the Association of Southeast Asian Nations (ASEAN) PMI slipped to 52.3 in November from 53.6 a month earlier, but was still in expansion territory.

“The PMI remained above the 50.0 mark to signal another improvement in manufacturing conditions, buoyed by further increase in factory production, with the rate of output growth easing only slightly from October’s survey record,” IHS Markit economist Lewis Cooper said.

Indonesia recorded the highest growth in the region with 53.9, followed by Malaysia (52.3), and Vietnam (52.2).

The Philippine PMI reading was the fourth highest in the region, while Thailand’s PMI stood at 50.6. Only Myanmar stayed below the 50 mark at 46.7, but the rate of contraction was the slowest since January.

“Overall, the latest data provide some promising signs, with the ASEAN manufacturing sector continuing to recover, and rates of growth in output and new work sticking close to their recent peaks,” Mr. Cooper said.

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