MANILA, Philippines — The domestic manufacturing sector extended its recovery in November, buoyed by strong demand for new orders, according to the latest reading of the Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI).
The Nikkei Philippines Manufacturing PMI rose to 54.8 in November from 53.7 in October and the highest reading for the year so far, indicating a faster pace of improvement in operating conditions for a third straight month.
A reading of below 50 points to worsening business conditions.
IHS Markit, the firm that collected data for the index, said local manufacturers saw faster increases in new orders, prompting them to increase purchases of input and hire new workers to meet orders.
Strong domestic economic conditions and higher foreign demand boosted manufacturing performance during the period, the report said.
Manufacturers, however, continued to feel the pinch of cost inflation because of the weakness of the peso and shortage of raw materials. Suppliers were under pressure to fullfill demand for inputs as demand exceeded supply. To protect profit margins, firms raised prices to pass on higher costs to consumers.
“The Philippines manufacturing economy is on course to end the year with its strongest quarter for 2017, with business conditions improving further during November. Furthermore, there are signs in the latest survey sub - indices to suggest the upturn will gather pace in December,” said IHS Markit economist Bernard Aw.
“The PMI suggests the strong growth momentum in the Filipino economy has some way to go. However, robust economic activity has been marred by rising inflationary pressures, commonly associated with a weak exchange rate. As such, higher prices remain an area of concern that policymakers need to watch closely. A further rise in global raw material costs, combined with a weak peso, will generate an unwelcome tightening of businesses’ profit margins.” he added.
The headline PMI is a composite indicator derived from survey questions on output, new orders, employment, inventories of inputs and suppliers’ delivery times, and, as such, provides a broad indication of the health of the manufacturing sector each month.