Factory activity stays in contraction in October

MANILA, Philippines — Philippine manufacturing activity remained in contraction territory for the second straight month in October as output and new orders continued to fall due to weak demand, according to S&P Global.

A survey of S&P Global showed that the Philippines Purchasing Managers’ Index (PMI) for manufacturing went down to 49.1 in October from 49.6 in September, marking the second straight month that the PMI declined.

A below 50 PMI indicates a decline from the previous month, while above 50 reflects an overall increase.

The country’s manufacturing sector’s health further deteriorated in October as both output and new orders continued to go down.

“Although declines in output and new orders remained modest, the sharper fall in purchasing activity and further job losses suggest manufacturers remain cautious amid subdued demand,” S&P Global Market Intelligence principal economist Siân Jones said.

Weak demand conditions were seen both in the domestic market and foreign buyers.

Some respondents attributed the weak demand  to the hot weather amid the El Niño phenomenon.

Nevertheless, manufacturers increased stocks of finished goods for the first time in four months.

This was driven by expectations that production will pick up in the coming months.

Jones said that business confidence hit a near two-year  high as firms expect new projects and customers to support production growth for the coming year.

“However, stronger optimism has yet to translate into a recovery in orders or hiring,” she said.

She also said that the Bangko Sentral ng Pilipinas’ latest 50-basis-point rate hike to 5.50 percent could further restrain demand and investment as borrowing costs increase.