AFTER the lockdown-induced slump in April, the Philippine manufacturing sector showed signs of recovery in May as its purchasing managers’ index (PMI) grew closer to the growth territory during the month.
In the latest report on Philippines Purchasing Managers Index (PMI), global think tank IHS Markit said local manufacturing conditions stabilized in May as the country reached a PMI of 49.9 during the month. This is a recovery from the 49.0 PMI recorded in the previous month.
A country’s PMI is meant to gauge 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.
“May survey data revealed a softer downturn across the Philippines manufacturing sector, as operating conditions inched towards stabilization,” the report read.
In particular, IHS Markit reported that output levels declined at a softer pace, while a marginal contraction in new orders was recorded.
Production volumes also still fell “solidly” in May, according to the report. Firms attributed the reduction to business closures and material shortages. That said, the rate of decline eased from that seen in April, as factories in some cities were able to restart operations.
“A surge in Covid-19 cases and ECQ [enhanced community quarantine] measures last month forced the Filipino economy back into contraction territory. May PMI data will therefore be welcomed as it revealed a swift movement towards stabilization with some businesses already resuming their operations,” IHS Markit economist Shreeya Patel said.
“Softer declines in output and new orders signalled a step in the right direction, whilst a renewed increase in overseas demand also supported the sector. There are also signs manufacturers are dealing well with supply issues as safety stocks continued to be built, helping keep backlogs at bay for now,” Patel added.
The economist, however, warned that while firms continue to reduce outstanding business, they face “strong” inflationary pressures.
In particular, the report said raw material scarcity and supply-chain disruption continued to worsen the firms’ cost burdens.
The rate of increase in prices softened slightly from that seen in April, IHS Markit said, but remained much higher than the long-run series average. This sustained period of rising expenses encouraged firms to pass on part of the burden, with selling charges rising to the greatest extent since November 2018, the report said.
Cuts to work forces also suggest firms are seeking to control soaring expenses.
“Nevertheless, policy-makers are working towards securing enough vaccines to inoculate a large proportion of the population. The rollout must gain momentum to prevent another tightening of measures and to encourage an economic recovery, however,” Patel said.
Read full article on BusinessMirror
