FACTORY ACTIVITY continued to improve in November, though by the smallest increment in five months as output and new orders bared weaker increases and employment “failed to improve,” IHS Markit reported on Monday.

A news release said the IHS Markit Philippines Manufacturing PMI (Purchasing Managers’ Index) eased to 51.4 in November from 52.1 in the preceding month, indicating “moderate improvement in operating conditions in the goods-producing sector.”

The latest reading was the lowest since June’s 51.3.

The headline PMI measures manufacturing conditions through the weighted average of five indices: new orders (30%), output (25%), employment (20%), suppliers’ delivery times (15%) and stocks of purchases (10%). The 50 mark separates readings above that denote improvement in operating conditions from the preceding month, while lower readings point to deterioration.

IHS Markit said “all five components… placed downward pressure” on the Philippines headline PMI.

The Philippines remained second among six Association of Southeast Asian Nations (ASEAN) members tracked for the fourth month in a row, after Myanmar (52.7), which dislodged the Philippines from the helm in February and which has topped the region since then. Vietnam, which has been the Philippines closest contender in this regard, posted a 51.0 reading.

The Philippine reading continued to outdo ASEAN’s PMI, which improved to 49.2 in November from 48.5 in October but still marked the sixth straight month of contraction on “further declines in output, new business and employment.”

“Growth softened to a modest pace in the Philippines manufacturing sector in November, as firms noted the weakest rise in factory orders since August,” IHS Markit economist David Owen said in the news release.

This, in turn, “led companies to hold back on hiring plans, signaling reduced pressure on capacity as output growth slowed.

The output index was at its weakest since April, indicating “a loss of growth momentum.”

Sales continued to rise, at a solid pace, the statement read, even as the rate of expansion “was the weakest since August.”

While domestic demand was strong, new foreign orders fell “for the fifth time in six months”.

Survey respondents said they held off hiring in the face of weaker sales growth, “with the latest data signaling unchanged payroll numbers from October” after “four successive months of job creation.”

“While some companies hired new workers due to greater output requirements, others reduced labor or chose not to replace voluntary leavers.”

Moreover, production input costs “rose solidly” by the quickest pace since February, “in part resulting from higher demand for inputs.”

Companies affected by higher input costs “often passed” the burden on to customers through higher selling prices, although “the overall mark-up was modest and only slightly faster than October’s 45-month low.”

Manufacturers also continued to complain of traffic that caused continued “deterioration in vendor performance in as many months.”

At the same time, the outlook for manufacturing output improved by “a notable extent” in November, marking the highest level in nine months as respondents looked to new products and opening of new factories next year.

The Philippine results were based on survey responses to monthly questionnaires by purchasing managers of about 400 manufacturers, collected on Nov. 12-24. — Beatrice M. Laforga

Manufacturing purchasing managers’ index of select ASEAN economies, November (2019)