Manufacturing output picks up as demand rises

Manufacturing picked up in October ahead of the holiday season although the weaker peso that month pushed costs higher, the latest Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI) showed.

At the start of the fourth quarter, the PMI score increased to 53.7 from 50.8 in September, “signaling a marked pickup in the pace of improvement in operating conditions,” global research firm IHS Markit said in a statement yesterday.

A PMI score of above 50 indicates an overall increase in manufacturing activity.

The PMI reading for October was also “well above the third quarter average,” IHS Markit noted.

“Growth in both output and new orders picked up noticeably, prompting firms to step up input purchases and hiring. Anticipating greater demand, companies also built up stocks of inputs and finished goods, while increased staff numbers helped them keep on top of workloads in October,” IHS Markit said.

After two months of marginal growth, there was a flurry of activity in the Philippine manufacturing sector at the start of the fourth quarter, IHS Markit noted.

Demand for Filipino manufactured goods strengthened noticeably, with order book growth picking up to a five-month high, it said.

“Greater demand lifted production volumes, which in turn prompted firms to hire more workers,” said Bernard Aw, principal economist at IHS Markit.

However, Aw warned that “further weakening of the peso poses a problem for manufacturers, especially those that rely on imported inputs for production.”

The peso hit fresh 11-year lows in October.

As such, “input cost inflation picked up sharply, which led firms to raise prices in order to preserve profit margins,” Aw said.—BEN O. DE VERA