THE Philippine manufacturing industry’s performance slightly dipped in March on slower overseas demand.
International think tank IHS Markit reported on Monday that the country’s Philippines’s Purchasing Managers’ Index (PMI) in March hit 52.2, slightly declining from the 52.5 PMI in the previous month.
A country’s PMI is aimed at gauging the health of its manufacturing sector. It is calculated as a weighted average of five individual subcomponents. Readings below 50 show deterioration in the industry while readings above the 50 threshold signal a growth in the manufacturing sector.
The think tank said the Philippines’s latest PMI reading was indicative of a modest improvement in the health of the manufacturing sector, with growth registered throughout the first quarter of 2021.
Broken down, local manufacturers saw an “especially subdued” foreign client demand during the month as restrictions linked to the Covid-19 pandemic persisted in abroad markets.
The Philippine manufacturing sector’s performance was still strong compared to its counterpart in neighboring countries in Southeast Asia. Out of the seven countries in the region, the Philippine manufacturing sector ranked the third strongest performance during the month.
Vietnam had the strongest PMI of 53.6, followed by Indonesia’s 53.2. After the Philippines’s 52.2, Singapore follows suit with 50.7. Malaysia and Thailand registered below the 50 growth threshold while Myanmar had the worst performance during the month with a PMI of 27.5.
While there is optimism among local manufacturers, IHS Markit economist Shreeya Patel warned of looming risks to the sector, especially on the price front.
“The Philippines manufacturing sector ended the first quarter on a positive note with a modest expansion recorded in March. Promisingly, output volumes rose despite a moderation in new order growth. Meanwhile, employment levels fell only marginally with anecdotal evidence suggesting that this was mostly voluntary, and not due to cost-cutting efforts at firms,” Patel said.
“A key area of concern, however, continues to be rising price pressures. Material shortages were often blamed for the higher costs incurred by firms. A sustained increase in client demand, however, allowed some firms to partially pass on rising expenses,” the economist added.
Employment in the sector, however, saw no improvement in March as it registered the 13th consecutive month of contraction in employment.
Supply chain pressures were also reported to be building up in March as lead times for inputs lengthened.
In particular, manufacturers cited freight delays as driving the deterioration in vendor performance, which resulted in significantly longer delivery times.
Image credits: Nonie Reyes