By Bianca Cuaresma & Elijah Felice E. Rosales
THE country’s manufacturing sector continued to expand in April on the back of strong consumer demand, based on the country’s Purchasing Managers’ Index (PMI) during the period.
International think tank IHS Markit announced on Wednesday the sustained recovery of the Nikkei Philippines PMI for April this year, reaching 52.7 from 51.5 in March, making it the highest reading for the country thus far. The PMI is a composite index which gauges the health of the country’s manufacturing sector. It is calculated as a weighted average of 5 individual subcomponents.
Readings above the 50 threshold signal growth in the manufacturing sector, while readings below 50 indicate a slow down.
The report noted that the expansion of the manufacturing sector for the second consecutive month can be attributed to the “strengthening demand conditions” at the start of the second quarter. “Order book growth accelerated noticeably to a four-month high, which was accompanied by faster output expansion. As a result, Filipino goods producers raised employment levels and scaled up purchasing activity,” the report read.
“Inventories also increased, though supply chains came under pressure. Optimism remained high, as did inflationary pressures,” it added. The firm’s principal economist Bernard Aw expressed optimism that the Philippine manufacturing sector started the second quarter on a robust note with growth in both output and new orders.
“First-quarter manufacturing expansion was affected by the January rollout of the new excise taxes, but April data suggests that demand has since adjusted to these higher levies,” Aw said.
“However, higher excise taxes continued to be felt through the pricing mechanism. While easing from the survey-record rate in March, input cost inflation remained elevated, not least because of a weak exchange rate, supply shortages and suppliers’ price hikes,” the economist added. He also said that in most cases, these firms were able to pass on some of the higher costs to their customers, but the pressure on profit margins remains marked.
The economist also believed that while prices are still on the rise, the local manufacturing sector will continue to be a source of strength in the coming months for the Philippine economy.
“Overall, it’s clear that underlying demand has improved, partly supported by stronger export sales. With companies’ optimism remaining high, despite the dip in April, it looks likely that growth may well accelerate further in coming months,” Aw said.
Investment pledges
Investment pledges approved by the Board of Investments (BOI) and the Philippine Economic Zone Authority (Peza) expanded by 53.2 percent to P182.83 billion in the first quarter, from P119.31 billion in the same period last year. The BOI accounted for a hefty chunk of the investment pledges at 83.2 percent, or P152.12 billion, while 16.8 percent, or P30.72 billion, came from the Peza.
Most of the investments were committed to electricity, gas, steam and air-conditioning supply sector at 57.1 percent, or P104.35 billion. Investments in this area ballooned by 2,074.5 percent from P4.80 billion year-on-year. Real-estate activities came in second with a 14.9-percent share at P27.24 billion, but dropped by 64.9 percent from P77.69 billion last year. Manufacturing accounted for P23.85 billion, or 13 percent. Investment pledges for the sector, however, were down by 19.64 percent from P29.58 billion.
Japan was the country’s top source of foreign investments with P7.86 billion in the first quarter. The figure was 1,185.2 percent higher than the P610 million recorded in the same period last year. Investments from the United Kingdom, the second top foreign investor, declined by 57.5 percent to P1.54 billion, from P3.63 billion.
Data from the Department of Trade and Industry showed that the Netherlands poured in P880 million; Singapore, P560 million; and the United States, P450 million. China’s investments grew by 71.1 percent to P410 million, from P240 million last year.