THE Philippine manufacturing sector recorded a strong growth in the first month of the year, signalling a “solid uptick” in business conditions in the country.
International think tank IHS Markit reported on Monday that the country’s Philippines’ Purchasing Managers’ Index (PMI) in January hit 52.5, rising from the 49.2 PMI in December.
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.
“The latest reading signalled a solid uptick in business conditions, indicating a move towards a recovery from the downturn onset by the coronavirus pandemic 2019,” the report read.
The Philippines’s January PMI is the strongest the sector has seen in 25 months.
The performance of the Philippine manufacturing sector has been see-sawing in previous months.
After months of contraction early in 2020, the country’s PMI pulled a solid recovery to hit above the growth threshold at 50.1 in September, only to be pulled back again to 48.5 in October due to renewed lockdowns.
In November, the country’s PMI rose to 49.9 then fell back to 49.2 in December.
The strong performance of the local manufacturing sector in January was attributed to improving customer demand which led to an uptick in output, new orders and purchasing activity which rose for the first time in 11 months.
“January data indicated a rebound in operating conditions across Filipino manufacturing sector after three successive months of decline. Production volumes rose solidly, while renewed growth in new orders indicated an overall improvement in demand conditions,” IHS Markit economist Shreeya Patel said.
An increase in purchasing activity and stocked inventories was also a positive sign that manufacturing companies expect demand to grow over the coming months,” the economist added.
The 52.5 PMI of the Philippines was the second strongest in the region in January. Data from IHS Markit showed that the Philippine manufacturing sector’s performance was second only to Singapore, which registered a PMI of 55.9.
Next to the Philippines’ performance is Indonesia’s 52.2 and Vietnam’s 51.3.
Thailand, Malaysia and Myanmar’s manufacturing conditions all fell below the 50-point growth threshold in January. Thailand registered a PMI of 49, Malaysia at 48.9 and Myanmar at 47.8.
Patel, however, warned that despite a strong performance at the beginning of the year, there are still “signs of fragility” in the manufacturing sector.
“Signs of fragility remained evident with staffing cuts and sharp cost pressures mounting. At the same time, virus-related restrictions contributed to substantially longer delivery times and subdued foreign demand,” Patel said.
“Businesses are hoping for a successful and swift vaccine rollout plan, which is scheduled to begin during the first quarter. Until then, restrictions are likely to stay in place as policy makers seek to contain virus case numbers,” the economist added.