THE Philippine manufacturing sector is at the cusp of stepping back into growth territory again after the steep contraction it incurred in the widespread disruptions caused by the ongoing global pandemic.
In a report on Wednesday, IHS Markit said the Philippines’ Purchasing Manager’s Index (PMI) climbed to 49.7 in June from 40.1 in May. According to the think tank, the latest reading was the highest since February, and signalled a further movement toward stabilization in the Filipino goods-producing sector.
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 below 50 show deterioration in the industry, while readings above the 50 threshold signal a growth in the manufacturing sector.
IHS Markit economist David Owen said much of the recovery stemmed from the government’s decision to shift to more relaxed rules. Owen also said production is now being raised for the first time since before the lockdown, marking a milestone in the reopening of the sector.
“The overall demand picture also notably improved, with new orders at manufacturers still falling but at a greatly reduced speed compared to May. Firms commented that new work remained weak due to the pandemic and ongoing restrictions; however, many panelists did see a pick-up in demand and rising customer orders. In addition, new orders from overseas fell at the softest rate in four months, helped by relaxed measures both domestically and abroad,” the report read.
However, Owen warned that many manufacturing firms still remained closed or operated at much lower capacity, suggesting that parts of the sector have some way to go to restore production to pre-pandemic levels. He said firms also have noticeably “held back” from hiring as a result of weak demand, as such, employment numbers dropped at the steepest rate since March.
“The sharper decline in workforces suggests that manufacturers may need to see a strong rebound in goods demand before job levels can expand. Signs from new orders and export orders data are encouraging, but the recovery may still be gradual as the pandemic continues and even accelerates in some regions,” Owen said.
In Southeast Asia, the Philippines ranked third out of seven being monitored by the think tank for PMI. The Philippine manufacturing sector also performed above the regional average of 43.7.
Vietnam led the pack in June, with a PMI of 51.1 followed by Malaysia at 51.0 during the month. Vietnam and Malaysia are the only two countries that climbed back to growth territory during the month.
Performing just below the Philippines’ PMI is Myanmar’s 48.7, Thailand’s 43.5, Indonesia’s 39.1 and Singapore’s 38.8.