PHL factory expansion losing steam
Posted on January 03, 2017
http://www.bworldonline.com/content.php?section=TopStory&title=phl-factory-expansion-losing-steam&id=138477
BUSINESS for manufacturers in the country continued to bare “strong improvement” in December, according to the latest Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI) that nevertheless flagged “a further loss of growth momentum” for the third month in a row.
Last month saw PMI — based on data collected Dec. 6-15 from purchasing executives in over 400 industrial companies — at 55.7, compared to November’s 56.3, reflecting “another solid expansion in the Filipino manufacturing industry,” according to a report e-mailed to media yesterday.
The manufacturing PMI consists of five sub-indices, with new orders having the biggest weight at 30%, followed by output (25%), employment (20%), suppliers’ delivery times (15%) and stocks of purchases (10%). A PMI reading above 50 suggests improvement in business conditions, while a score below that threshold reflects deterioration.
“However, the headline index slowed for a third time in a row, where the latest reading was barely above the series average” since January, the report noted.
It quoted Bernard Aw, economist at IHS Markit that conducts the survey for Nikkei, Inc., as noting that “[t]he Philippines continued to see strong improvements in manufacturing conditions during December, where robust client demand underpinned the PMI.”
“Growth in key variables such as production volumes, new orders, employment and purchasing activity remained marked. Filipino manufacturers continued to increase staff numbers to meet greater operational requirements,” Mr. Aw added.
Output “rose at a quicker pace” last month and new orders “reflected strong client appetite,” the report said, even as it noted that “the rate of expansion in new work was the slowest since March.”
“[W]hile the manufacturing sector registered another expansion, there was a further loss of growth momentum at the end of the fourth quarter,” Mr. Aw noted.
“Total new orders, input buying and employment all rose at slower rates.”
Foreign demand strengthened further, but at a pace slower than November’s “record-high rate.”
Purchasing increased, though at a slower rate, leading to a further rise in pre-production inventories that was nevertheless the slowest in six months.
Firms hired more “to meet growth in new work,” but job creation was the slowest since August.
The report cited “concerns that traffic congestion and customs bottlenecks impeded the smooth delivery of pre-production materials” and noted that manufacturers “faced the sharpest rise in cost inflation in December” while “hikes in selling prices were… broadly stable.”
“If this continues, manufacturers’ profit margins may come under pressure in the coming months,” Mr. Aw said.
