THE Philippine manufacturing sector contracted to its lowest on record in March, as demand fell and delays hounded the sector amid the Luzon enhanced community quarantine during the period.
The IHS Markit Philippines Manufacturing Purchasing Managers Index (PMI) fell well below the 50.0 threshold mark in March, posting 39.7, down from 52.3 in February.
“The latest figure was the lowest in the series history, having dropped below the 50.0 neutral mark for the first time, and signalled a marked deterioration in operating conditions,” IHS Markit said.
The PMI is a composite index aimed to gauge the health of the country’s manufacturing sector. It is calculated as a weighted average of five individual subcomponents. Readings above the 50 threshold signal a growth in the manufacturing sector while readings below 50 show deterioration in the industry.
Prior to the coronavirus (Covid-19) outbreak, the Philippines had one of the top-performing manufacturing sectors in Southeast Asia.
In March, however, the Philippines’s production industry proved to be one of the hardest hit in the region. In IHS Markit’s survey for the month, the Philippines ended as the second worst performing in the region. Singapore performed the worst with a PMI of 18.1.
Overall, Asean’s headline PMI averaged 43.4 during the month. This is the lowest in the survey’s eight-year history and the first time that all seven economies were below the 50 threshold mark in one given month.
“The Covid-19 pandemic took its toll on goods production in the Philippines in March, as the enforced lockdown of Luzon island led many manufacturers to halt operations until restrictions are lifted. These shutdowns led to sharp declines across the sector, with output, new orders, employment and stocks of purchases all falling at record paces,” David Owen, economist at IHS Markit, said.
Owen further said firms that remained open also saw a large delay in supplier delivery times, thereby restricting their ability to operate at full capacity.
“Exports were similarly down as surrounding countries enforced their own lockdowns whilst curtailing foreign orders. Unsurprisingly, businesses were much less positive regarding the 12-month future period. With no one knowing the full timeline of the pandemic, the extent of the economic impact remains largely unknown,” he added.
On a regional level, Owen said: “Restrictive measures stemming from efforts to contain the Covid-19 outbreak and substantial uncertainty surrounding the outlook also eroded firms’ output expectations during March.
“Overall, March highlighted the worst performance of the Asean manufacturing sector on record, as repercussions from the Covid-19 pandemic are realized, and indeed it is likely that they will be felt for several months to come, if not longer,” he added.