New orders boost PHL manufacturing sector in December–Think tank

Image credits: Nonoy Lacza

The Philippine manufacturing sector ended 2019 on a high note as it registered a slight improvement in December, according to a report released by global think tank IHS Markit on Thursday.

IHS Markit said the the Purchasing Managers Index of the Philippines rose to 51.7 in December, from 51.4 in November—a modest improvement in manufacturing conditions, which is in line with the average seen for 2019.

The PMI is a composite index that serves as gauge of the health of the country’s manufacturing sector. It is calculated as a weighted average of five individual sub-components. Readings above the 50 threshold signal a growth in the manufacturing sector while readings below 50 show deterioration in the industry.

IHS Markit said the improvement was partly driven by a solid rise in new orders received by Filipino manufacturers, with the rate of growth strengthening slightly from November. Alongside a broad-based increase in sales, firms noted a slight upturn in new work from foreign clients, marking only the second monthly expansion in seven months. The Philippines ranked second in the region in terms of PMI during the month.

At the country level, Myanmar continued to top the rankings, recording the highest headline figure of the seven monitored countries. Vietnam ranked in third after the Philippines followed by Thailand and then Malaysia.

The PMI of Indonesia and Singapore continued to slip below the 50-mark in December, which indicates that their manufacturing sector is in the contraction phase.

For the Philippines, manufacturers increased production only marginally, with the pace of growth weakening to a 27-month low.

While stronger sales helped businesses to expand output overall, some firms mentioned that delays in input deliveries and difficulties in sourcing raw materials curtailed production.

Traffic issues were still a key factor influencing supplier delivery times, although panelists noted that typhoons and congestion at Manila port also contributed to the slowdown.

“Most notably for manufacturers though are clear supply-side issues that are restricting output. Growing road and port congestion, particularly in Manila, remain a key feature of businesses’ concerns,” said David Owen, economist at IHS Markit.

“The government has announced its ‘Build, Build, Build’  program to address the problem which some firms are hopeful will reduce supply chain blockages. Nevertheless, for the moment, production is being limited, and may remain so until these issues have been addressed,” he added.

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