DESPITE signs of growth in November 2020, the Philippine manufacturing sector’s performance worsened anew in December on sluggish demand and poor weather conditions.
According to the report published by IHS Markit on Monday, the Philippines’s Purchasing Managers’ Index (PMI) in November hit 49.2, rising from November’s 49.9 print.
A country’s PMI is meant to gauge the health of its 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 analyst Shreeya Patel said the December data indicates another contraction in operating conditions across the Filipino goods-producing sector and that the restrictions due to the pandemic are hitting manufacturers hard.
“Although the latest overall sector contraction was only marginal, domestic demand remains challenging, which may stymie progress on the lengthy road to recovery,” Patel said.
Broken down, while new orders for manufacturing were broadly unchanged in the final month of 2020, firms reported contractions in output volumes amid ongoing pandemic restrictions.
“Ongoing lockdown restrictions and poor weather contributed to a decline in output volumes in December. Although modest, the rate of decline was among the fastest in the series history,” IHS said in its report.
The downturn in output volumes and weak demand conditions led firms to cut work force numbers in the final month of 2020.
“Job shedding persisted at a strong rate which firms linked to restructuring efforts and voluntary resignations,” IHS Markit said.
The costs of manufactured goods also rose during the month, as material shortages led to a sharp rate of input price inflation during December. Firms then reported that they had to partially pass the cost burdens to customers.
“The addition of material shortages and supply chain pressures placed pressure on operating conditions, whilst reduced output led to another month of sharp job cuts,” Patel said.
“That said, positives can be drawn from the latest survey findings; new orders neared stability and sentiment recovered to levels seen before the start of the pandemic. At the same time, case numbers have moderated with expectations that restrictions will ease over the coming months,” the analyst added.
The performance of the Philippine manufacturing sector has been see-sawing in previous months.
In September, the country’s PMI pulled a solid recovery to hit above the growth threshold at 50.1, only to be pulled back again to 48.5 in October due to renewed lockdowns.
Image credits: Nonie Reyes