THE strong performance of the Philippine manufacturing sector in January this year may be an indicator of better recovery prospects for the economy in 2021, a local bank economist said.
In his latest commentary on the Philippine economy, Rizal Commercial Banking Corporation (RCBC) economist Michael Ricafort said the Philippines’s recent Purchasing Managers’ Index (PMI) is a “pleasant surprise” to the economy that could be an early indicator of sustained recovery after the holiday surge.
“[The January PMI is] a leading indicator that could suggest further pickup in business and economic activities as sustained even after the Christmas season in December 2020,” Ricafort said.
International think tank IHS Markit reported on Monday that the country’s 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 Philippines’s January PMI is the strongest that the sector has seen in 25 months.
“Latest moves to further re-open the local economy, including easing of some restrictions on public transportation and continued improvement in some economic data, locally and globally, from the worst levels at the height of the Covid-19 lockdowns/stay-at-home orders in April-May 2020 may have led to some improvement in the manufacturing activities, as partly manifested by the pickup in both exports and imports in recent months,” Ricafort said.
Going forward, Ricafort said further measures to reopen the economy will lead to a sustained and faster recovery in manufacturing.
“For the coming months of 2021, increased infrastructure spending, as part of the priorities of the economic recovery program, would benefit contractors and manufacturing industries that are part of the supply chain and value chain,” Ricafort said.
The economist, however, warned that the sustained recovery in the manufacturing sector and its indication of overall recovery in the economy will only be justified if new Covid-19 cases ease or improve, especially with the expected rollout of vaccines in the latter part of 2021.
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