Philippines: Manufacturing PMI shows stronger activity at the start of Q4
November 2, 2017
The manufacturing Purchasing Managers’ Index (PMI) rose robustly from 50.8 in September to a four-month high of 53.7 in October according to a release provided by Nikkei and IHS Markit. The PMI thus moved further above the 50-point threshold which separates expansion from contraction in the manufacturing sector.
October’s stronger reading came on the back of considerably faster growth in both new orders and output, which led to the first increase in employment in three months and to firms stepping up input purchases. Domestic demand was again the main driver of sales growth, while growth in external orders remained moderate. Despite the notable rise in new orders, backlogs of work fell for the twentieth consecutive month, as an increased availability of capital equipment and additional staff allowed companies to expand production at the strongest pace since June.
On the price front, a weaker peso translated into rising costs for imported materials, which led to faster input cost inflation and higher selling prices, which experienced the strongest acceleration in the survey’s history. On a more positive note, business confidence remained elevated in October—despite weakening marginally on fears of possible shortages in raw materials—as firms forecast higher sales and business expansions.
Commenting on the release, Bernard Aw, Principal Economist at IHS Markit, noted that:
“After two months of marginal growth, there was a flurry of activity in the Philippines manufacturing sector at the start of the fourth quarter. [...] [Nevertheless] inflationary pressures are building in the Philippines, suggesting that consumer inflation may trend above BSP’s inflation expectations. That will compel the central bank to consider tightening monetary policy as early as this year.”