THE reimposition of lockdowns in the country due to the surge in Covid-19 cases has pulled the country’s manufacturing sector back to contraction territory in August.
In its latest report on Philippine Purchasing Managers Index (PMI), global think tank IHS Markit said the country posted a PMI of 46.4 in August—a sharp decline from the 50.4 PMI print in July. It is also the steepest PMI contraction of the country since May last year.
The August PMI also erased the early gains in the sector, particularly the PMI expansion in June and July.
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.
“With the announcement of tightening ECQ [enhanced community quarantine] measures in early August, the latest contraction in operating conditions in the Philippines manufacturing sector came as no surprise,” IHS Markit economist Shreeya Patel said.
“Factories and their clients in the Metro Manila area once again paused their production lines in a bid to curb the spread of the new delta variant. Consequently, all five
of the PMI components worsened, or fell deeper into contraction territory, with the PMI at a 15-month low in August,” the economist added. The report said local production volumes fell for the fifth month in a row, with the rate of decline quickening to one which was the fourth quickest in the series history.
The contraction was linked to the third wave of Covid-19 cases and the subsequent tightening of restrictions which led to factory and business closures during the month.
Customer demand also fell sharply with the volume of new orders declining at one of the quickest rates in the series history.
“Tighter restrictions on travel and the closure of businesses led clients to curb orders. Weak domestic sales were accompanied by a renewed contraction in foreign demand,” the report read.
The contraction in the country mirrored the performance of the region.
For the first time since May 2020, each of the seven constituent nations recorded deterioration in conditions during August. The PMI of the region hit 44.5 in August, slightly down from the 44.6 in July. The steepest pace of contraction was seen in Myanmar, where the PMI of 36.5 remained among the lowest on record. This was followed by Vietnam, where the headline index hit 40.2.
Malaysia and Indonesia, also saw PMI declines during the period but eased from their deterioratwion in July. Malaysia’s August PMI reading hit 43.4 while Indonesia’s was at 43.7.
Singapore, meanwhile, was behind the Philippines with a PMI of 44.3. Thailand performed best with a PMI of 48.3.
Image courtesy of Nonie Reyes