Factory output up in Nov as inflation woes subside

Manufacturing grew for the fourth straight month in November as factories ramped up domestic production even as export orders fell, the latest Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI) released on Monday showed.

The seasonally adjusted PMI climbed to an 11-month high of 54.2 last month from 54 in October, global research firm IHS Markit said in a report.

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

In a separate report on the Association of Southeast Asian Nations region, IHS Markit noted the Philippines’ PMI reading in November indicated a “solid increase” in domestic manufacturing activities compared to October, ranking only behind Vietnam.

“Output growth remained sharp in the Philippines’ manufacturing sector during November, building confidence for stronger GDP (gross domestic product) growth in the fourth quarter. The headline Nikkei PMI strengthened even further from October, while production levels rose at the fastest rate in almost two years,” IHS Markit economist David Owen said in a statement.

“Filipino manufacturers were boosted by a sharp increase in new orders in November. Marginally quicker than in October, the latest rise in demand was the strongest seen in 12 months,” IHS Markit said.

However, new export orders dropped at its fastest pace in the history of the Nikkei PMI Index for the Philippines, according to IHS Markit.

“On the flip side, export orders continued to decline, with the latest drop the quickest seen since the survey began nearly three years ago. Manufacturers were unfazed, though, as domestic demand was strong enough to offset the fall. Nonetheless, should the trend continue in line with the global trade slowdown, it may dampen output growth in the new year,” Owen said.

Undeterred by weak export orders, domestic manufacturers still ramped up production to 23-month highs, IHS Markit said.

It helped that inflationary pressures were cooling, auguring well for manufacturing firms, it added.

“Input prices eased to their weakest rate of inflation all year in November. Recent pressures from the TRAIN law and the exchange rate with the dollar are showing signs of wavering, offering hope of a more settled end to 2018 for manufacturers,” Owen said, referring to the Tax Reform for Acceleration and Inclusion Act, which jacked up excise across a number of products at the start of the year.