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Business

Factory output hits 8-month high in November

Louise Maureen Simeon - The Philippine Star

MANILA, Philippines — The manufacturing sector remained in expansion mode in November, hitting an eight-month high, as the country continues to rebound from the Delta wave and as mobility curbs are further eased.

Market intelligence firm IHS Markit said the Philippines’ headline purchasing managers’ index (PMI) marginally picked up to 51.7 in November from 51 in October.

The headline index continued to register above the neutral 50 mark that separates expansion from contraction.

The latest reading is also the strongest uptick in eight months, or since March 2021, and is over the average for the whole year so far.

The headline PMI provides a quick overview of the health of the manufacturing sector based on the weighted average of five indicators: new orders (30 percent weight), output (25 percent), job creation (20 percent), supplier delivery times (15 percent) and inventories (10 percent).

IHS Markit’s latest reading reflected the continued recovery, although slow, of manufacturing conditions in the country.

This follows the downgrade to Alert Level 2 in Metro Manila and several provinces during the month as the country logs declining COVID cases on a daily basis.

“Latest PMI data continued to signal a recovery in operating conditions in the Philippines, supported by expansion in new orders, which was the first uptick since the end of the opening quarter of the year,” IHS Markit economist Shreeya Patel said.

Demand also expanded for the first time in eight months, while output neared stability amid relaxing COVID-19 restrictions that prompted greater client demand.

However, production volumes fell for the eighth consecutive month, although minimal, driven by material and staff shortages and delay in receiving inputs.

Traffic issues, port congestion and difficulties sourcing materials influenced another deterioration in vendor performance during the month.

IHS Markit said firms are still on a scale-back mode in terms of hiring, with staffing levels falling for the 21st month, although the rate of decline is the softest in four months.

Voluntary resignations led to the decline, but corporations also reportedly found it difficult to source skilled replacements. Nonetheless, firms were able to keep up with demand as employees worked overtime to complete existing orders.

Businesses continued to face global material shortages, with delivery delays and intense cost pressures also adding to production difficulties.

As new orders expanded, firms raised their stocks of purchases for the second straight month amid expectations of improving demand that encouraged stockpiling.

Delays and material shortages have led to the sharpest rise in input costs since March 2018, which was among the steepest in almost six years of data collection.

IHS Markit said the surge was linked to higher raw material, transportation and energy costs.

This prompted firms to raise anew the prices of their products to pass on some of the cost burdens to customers.

Overall, business confidence rose to a 21-month high amid hopes of a return to normality, higher sales and greater demand moving forward.

Although business sentiment ticked higher than the average for the year so far, sentiment was still below its long-run average, indicating that concerns regarding the pandemic persist.

“On the COVID-19 front, low vaccination rates remain one of the sector’s largest threats. The Philippines government nevertheless remains committed to inoculating the population before the end of 2022,” Patel said.

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