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AFTER months of ups and downs, the local manufacturing sector showed signs of stabilization in September due to increased new orders and improving overall business confidence.
In a report on Thursday, IHS Markit said the Philippines PMI rose to enter the growth threshold at 50.1 in September from the 47.3 index the previous month.
The PMI is a composite index designed to measure the health of the country’s 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 indicate growth in the manufacturing sector.
“The latest manufacturing data from the Philippines showed that operating conditions stabilized at the end of the third quarter. New businesses expanded for the first time since February, albeit tentatively, while production levels fell only slightly, ”said Shreeya Patel, economist at IHS Markit.
New orders increased for the first time since February, driven by improving customer demand as more parts of the economy reopened following the easing of coronavirus disease 2019 (Covid-19) restrictions . At the same time, production contracted at the weakest pace for three months, falling only marginally overall.
Business confidence also improved to its highest level since February, with optimistic forecasts often attributed to hopes of increased demand and the passing of the Covid-19 pandemic.
“Stronger business sentiment and efforts to rebuild stocks suggest that panelists are preparing for an improvement in demand in the coming months, although optimism continues to rest on the development of the pandemic,” Patel said.
However, IHS Markit said the PMI survey indicated that employment continued to decline significantly, which manufacturers often linked to a lack of replacement of volunteer graduates and sufficient capacity.
Production volumes fell for the third month in a row in September, with companies indicating that current Covid-19 restrictions continued to hamper activity.
Across Asean, the Philippine manufacturing sector was the second best performing for the month, only after Vietnam, which posted an overall PMI of 52.2.
Thailand followed the Philippines at 49.9 and Malaysia at 49. Singapore’s PMI posted 48. Indonesia and Myanmar had the worst results for the month, with PMIs of 47.2 and 35.9, respectively.
Asean’s average PMI for September fell to 48.3 in September from 49 in August.
“Conditions in Asean’s manufacturing sector remained challenging at the end of the third quarter. The main PMI signaled a seventh consecutive deterioration in the health of the sector, amid a further decline in factory production and a further decline in total new orders, ”said Lewis Cooper, economist at IHS Markit.
