Sept. factory growth slowest in 3 months

BUSINESS CONDITIONS for manufacturers in the country improved by the slowest clip in three months in September, as a cautious outlook as well as slower employment and purchasing growth capped the lift from “a solid rise” in new orders, according to the latest Philippine survey conducted by IHS Markit, which released results on Tuesday.

The IHS Markit Philippines Manufacturing PMI bared a 51.8 reading for September that compared to August’s 51.9 and July’s 52.1, while the separate IHS Markit ASEAN Manufacturing PMI showed the Philippines keeping the second place from August among the seven countries covered by the regional survey.

The Purchasing Managers’ Index (PMI) is the weighted average of five sub-indices, namely: new orders (30%), output (25%), employment (20%), suppliers’ delivery times (15%) and stocks of purchases (10%). Overall readings above 50 signal expansion on a monthly basis while those below that mark denote contraction.

“Businesses were encouraged by a solid rise in total new orders, despite overseas demand falling at the quickest rate seen in the series history so far,” according to a summary of Philippine survey results.

“However, difficult trading conditions led to a dampened one-year outlook, while employment and purchasing activity growth also slowed.”

In the region, the Philippines was bested by Myanmar which, with its 52 reading unchanged from August, has topped Southeast Asia since February.

The Philippines outpaced Southeast Asia’s 49.1 reading, which nevertheless picked up from August’s 48.9 — amid “the fastest decline in production since July 2017 and a back-to-back reduction in new orders” — but still marked the fourth straight month of slowdown in the region.

Philippine production growth slowed for the third straight month, even as new orders increased at a faster pace than in August — but mainly due to stronger domestic demand. Export orders fell for the fourth month in a row, marking the steepest drop in Philippine survey history.

IHS Markit Economist David Owen noted that “[a] key factor was falling export sales, which declined at the quickest rate recorded in the series history so far.”

“It appears that firms are losing hope of there being an end in sight for the US-China trade war, which looks to be dampening export orders at an accelerated pace in the Philippines.”

At the same time, “domestic new orders are increasing and leading to a solid rise in total demand, allowing firms to continue on their path of expanding production.”

The increase in prices of production inputs accelerated by the quickest pace since February, as some respondents said “a shortage of materials led some suppliers to raise their fees.”

But output price increased at the slowest clip since June 2017, with some Philippine respondents saying that competitors’ lower prices made them reduce charges.

And “while business expectations were positive, they were also the least optimistic on record,” mainly due to concerns about escalating Sino-US trade tensions.

“The one-year business outlook among Filipino manufacturing companies fell to a new survey low in September. While still optimistic on average, firms were at their most downbeat since the series began in 2016,” Mr. Owen said.

Employment rose only marginally in September and at a slower pace than in August “as greater labor requirements were offset by resignations at a number of companies.” — Beatrice M. Laforga