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By Beatrice M. Laforga, Reporter
PHILIPPINES MANUFACTURING data worsened in October as demand remained weak and job cuts persisted amid a coronavirus pandemic, according to a survey by British information provider IHS Markit Ltd.
The country’s manufacturing purchasing managers index (PMI) fell to 48.5 last month from 50.1 in September, the seventh time the index fell below the neutral mark of 50.
It was better than the all-time lows recorded during the height of the pandemic in April, when strict closures were imposed.
A reading above 50 means that manufacturers reported an improvement, while falling below the threshold indicates a worsening of conditions.
“Despite widespread stabilization in September, the latest PMI data indicated that operating conditions in the Philippine manufacturing sector worsened in October as the economic fallout from the coronavirus disease 2019 (COVID-19) pandemic persisted.” IHS Markit said in a statement posted on its website.
The companies saw a further drop in new orders amid trade closures and weakening customer demand, he said. “The job loss extended into the fourth quarter, while purchasing activity also declined.”
Business sentiment remained positive, however, and improved amid hopes for higher production in the coming year, according to the statement.
“This decline may be telling us all that the reopening could be causing some momentary spikes, but demand itself has not yet risen from the deep drop,” said Ruben Carlo O. Asunción, chief economist at UnionBank of the Philippines, Inc . it’s a statement. email.
“It may also be signaling a long challenging road towards recovery from pre-COVID-19 domestic and external demand levels,” he added.
The Philippines tied Malaysia for third place among the six Associations of Southeast Asian Nations, behind Thailand, whose index improved to 50.8 and Vietnam to 51.8.
The country’s index was slightly below the regional average of 48.6, but still better than Indonesia (47.8) and Myanmar (30.6).
The index for most of Asia showed that manufacturing conditions improved in October, and strong global demand for electronics is expected to lift the sector in the coming months, Alex Holmes, an economist at Capital Economics, said in a note on Thursday. Monday.
The Purchasing Managers Index is a weighted average of befive indices: new orders (30%), production (25%), employment (20%), supplier lead times (15%), and stock purchase (10%).
IHS Markit attributed the drop in the Philippines index to persistent weak demand and business closures.
LESS ORDERS
He said production volumes contracted again faster last month, but the contraction was still marginal, as most companies reported weaker consumer demand.
The survey also found that new orders fell again last month after a brief rebound in September, mainly due to lower domestic demand. This was tempered by the increase in new orders from abroad, which increased for the second month in a row.
Philippine manufacturing companies slashed staffing levels, and employment fell for the eighth month in a row, he said.
“Another monthly reduction in backlogs highlighted evidence that excess capacity persisted throughout the manufacturing sector,” he added.
A renewed fall into a new order inFloridaThe flows led the companies to reduce their input reserves. Stocks of both raw materials and beThe finished goods sold out, which the companies linked to supplier shortages and demand uncertainty, IHS Markit said.
Supply chain problems remained apparent as lead times lengthened in October, extending the current period of deterioration in supplier performance to 15 months. “The longest delays were largely related to transportation restrictions,” he said.
IHS Markit said that the reopening of business would support a rebound in the economy, although coronavirus infection rates in the Philippines remained high compared to its regional peers.
“Until virus cases are brought under control domestically and globally, we are likely to see a prolonged recovery in manufacturing output,” Shreeya Patel, an economist at IHS Markit, said in the statement.
Meanwhile, input prices at Philippine companies rose due to higher raw material costs and supplier surcharges. However, the increase was the slowest since May.
Producer prices also increased marginally. Those who reported an increase said they had passed on the higher cost charges, while those who posted lower charges said the move was part of discount strategies to attract more buyers.
Despite last month’s bleak numbers, business expectations for the next 12 months remained positive, IHS Markit said.
Manufacturers expected production to increase next year due to expectations of new expansion plans and new products.
“The degree of scambeHowever, the difference was below the long-term series average, as some beCompanies continue to expect COVID-19 to have a long-term impact on production, “he added.
Deteriorating manufacturing conditions showed that the Philippine economy was struggling to return to normal, said Emmanuel J. López, dean of the Colegio de San Juan de Letrán in Manila.
“The manufacturing sector is still picking up the pieces, but it will slowly rebound in the coming weeks and months as the economy slowly returns to a semblance of normalcy,” he said in an email response to questions on Tuesday.
Blockades in most areas of the country have eased since June as the government tries to revive the economy, which is expected to contract 6% this year.
Oxford Economics said in a note on Monday that deteriorating external conditions amid fresh quarantines in some parts of Europe could threaten gains in most Asian economies after the shutdown.
“With external conditions deteriorating again amid lockdowns in parts of Europe, we expect downward pressures to intensify,” the think tank said. “A (Joe) Biden victory in the US election would provide some relief, but the positive impacts may not be felt until the second half of 2021.”
The 2020 U.S. presidential election is scheduled for November 3. Voters will choose presidential electors who, in turn, will vote on December 14 to elect a new president and vice president or re-elect incumbents Donald Trump and Mike Pence, respectively.
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