PH manufacturing sees quicker expansion in output in Oct

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  • The Philippine manufacturing sector improved for the second consecutive month in October bolstered by quicker expansions in factory orders and output
  • Headline index indicated the fastest upturn in seven months
  • The Philippines’ Purchasing Managers’ Index rose from 50.6 in September to 52.4 in October
  • Manufacturers remained optimistic about the outlook

The Philippine manufacturing sector improved in operating conditions in October, supported by quicker expansions in factory orders and output.

This is the second consecutive month of improvement in operating conditions with the headline index indicating the fastest upturn in seven months.

The Philippines’ Purchasing Managers’ Index (PMI)–a composite single-figure indicator of manufacturing performance–rose from 50.6 in September to 52.4 in October, according to S&P Global.

“PMI data for the Philippines manufacturing sector signalled that improving underlying demand trends supported quicker expansions in the two largest constituents of the PMI – new orders and output – at the start of the fourth quarter,” S&P Global economist Maryam Baluch said in a statement.

“Operating conditions improved at the strongest pace in seven months. Moreover, increased workloads also supported growth in buying activity and employment. Additionally, price pressures continued to fade signalling the easing of strong inflationary pressures seen for the most part of the last two years,” she said.

“Filipino manufacturers remained optimistic, with growth in output anticipated in the year ahead. However, global headwinds and the lagged effects of the monetary policy tightening remain a downside risk to the sector.”

Manufacturers in the Philippines reported new orders rose at a solid and accelerated pace in October. Underlying data highlighted that new client wins and improved demand conditions supported the latest uptick in sales. Additionally, firms recorded a renewed rise in new export orders, following on from a solid contraction in the previous survey period.

With demand conditions strengthening, growth in production volumes quickened. Output rose for the 14 the successive month in October. Moreover, the rate of increase was the fastest for five months.

Improved business conditions also encouraged firms to raise employment, as workforce numbers increased for the second month running. That said, the rate of job creation was only marginal and broadly in line with that seen in September.

October data signaled a fourth consecutive monthly fall in backlogs. Moreover, levels of unfinished work were depleted at the sharpest pace in nearly two years.

Additionally, after goods producers in the Philippines halted input buying activity in September, October data revealed renewed, albeit modest growth. Anecdotal evidence noted that a faster rise in factory orders and hopes of increased output over the coming year supported the latest upturn.

With buying activity rising, firms were able to build their stock levels as Filipino manufacturers recorded a fresh expansion in pre-production inventories. Meanwhile, stocks of finished goods rose for the fourth successive month, though at the weakest pace in the current sequence of increase.

Improved vendor performance made it easier for firms to receive inputs in a timely manner. Average lead times shortened for the second month running, though to a slightly lesser extent than was seen in September.

Operating expenses rose in October, amid reports of greater raw material and energy costs. That said, the pace of input price inflation was the slowest in four months and below the long-run average.

Similarly, factory gate charges rose only modestly and at a less pronounced rate than in September.

Looking ahead, goods producers in the Philippines were optimistic regarding the outlook over the coming year, with over a third of PMI survey panelists expecting growth in output. However, the degree of confidence weakened on the month and was the lowest for 16 months.

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