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MANUFACTURING ACTIVITY in the Philippines remained in expansionary mode for the second consecutive month in February, as demand rebounded with more businesses reopening, a survey by IHS Markit showed.
The Philippines Manufacturing Purchasing Managers Index (PMI) in February was unchanged at 52.5, and held above the neutral 50 mark that separates growth from contraction.
The latest PMI reading was the highest in more than two years or from 53.2 in December 2018.
“The latest PMI data shows further progress in the Philippine manufacturing sector, with another strong overall expansion recorded during February. Production and new order growth persisted, while an acceleration in pre-production inventories suggests a commitment to increased production in the coming months, ”IHS Markit economist Shreeya Patel said in a statement.
The Philippines PMI reading was better than the 49.7 average for the Association of Southeast Asian Nations (ASEAN), which fell below the neutral mark of 50 for the first time since October.
It was also the second best in the region, after Singapore (55.2) but ahead of Vietnam (51.6) and Indonesia (50.9). Other Southeast Asian economies saw a contraction in manufacturing activity, such as Malaysia (47.7), Thailand (47.2) and Myanmar hit by the blow (27.7).
“However, the rate of decline (in ASEAN) was only slight, reflecting only slight reductions in both production and new orders … Overall, the data only suggests a slight bump on the road to recovery during February, “IHS Markit Economist Lewis Cooper said in a separate statement.
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IHS noted that the Philippines saw a “modest” increase in production in February, although softer than the rate in January. The companies noted that the increase in production was supported by higher orders and strong demand.
New orders increased, “and the firms mentioned the resumption of business at client firms after easing restrictions,” IHS said.
“The local PMI is benefiting from the rebuilding of inventories,” said Security Bank Corp. chief economist Robert Dan J. Roces in a text message.
However, IHS noted that there was a drop in export orders as the coronavirus pandemic continued to hamper the recovery of demand in international markets.
“COVID-19 continues to pose a major threat with material shortages and transportation delays as a result of pandemic restrictions. Exports were also severely affected and foreign demand fell considerably in February, ”said Patel.
IHS also noted that companies increased purchasing activity last month, anticipating growing demand.
Businesses also continued to cut jobs, although it was the softest rate in a year. IHS said employment fell by 12th consecutive month, mainly due to voluntary resignations and theirfficient capacity.
IHS said input price inflation saw the steepest rise since October 2018 due to a shortage of raw materials. The companies indicated that they will pass the higher costs on to consumers as prices rise.
“For now, controlling the COVID-19 pandemic remains at the center of the Philippines’ agenda, and while vaccines have been secured, delivery delays have severely hampered efforts to vaccinate the nation,” Patel said .
IHS said the survey also showed that Philippine companies continued to have a positive outlook for the coming year, and that the degree of optimism increased from January.
“As the Philippines continues to relax its quarantine protocols and as consumer confidence continues to rise, we can look forward to this. [demand for manufactured goods] to recover more, ”said Asian Institute of Management economist John Paolo R. Rivera in a Viber message.
Rivera said the widespread implementation of the vaccination program will also help restore consumer confidence. – Luz Wendy T. Noble
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