THE Philippine manufacturing sector climbed back to growth territory in June, after restrictions on travel and movement were eased to support the local economy.
In its latest report on Philippines Purchasing Managers Index (PMI), global think tank IHS Markit said the country posted a PMI of 50.8 in June, up from the 49.9 reading in May.
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.
The latest expansion followed two consecutive months of decline. This, according to IHS Markit, signals a rebound in operating conditions in the Philippines.
“Filipino manufacturers signaled a rebound in operating conditions at the end of the second quarter, led by softer declines in output, new orders, and employment, as well as a renewed expansion in pre-production inventories,” the report read.
IHS Markit economist Shreeya Patel, however, warned that the recovery is still muted for the manufacturing sector and must be monitored in the coming months.
“It was not all good news in June, however, with MECQ [modified enhanced community quarantine] measures persisting and, in some instances, delaying the supply of inputs. Meanwhile, rising raw material and transportation costs were often faced by goods producers during the month,” Patel said.
“Output prices rose further, and at the quickest rate in over two years, suggesting firms are committed to somewhat cushioning any potential losses,” the economist added.
The report also noted that vendor performance deteriorated further—and to the greatest extent for 10 months—due to port congestions and virus-related restrictions. In contrast, international demand for Filipino manufactured goods rose for the second successive month, and with a rate of growth that was stronger than the historical average.
“Nevertheless, with the vaccination program still in the early stages, controlling the spread of the pandemic remains principal to preventing another series of tightening restrictions. Firms in the meantime will hope issues surrounding the supply of materials are resolved,” Patel said.
ING Bank economist Nicholas Mapa said trends for the manufacturing sector will likely take their cue from the level of mobility restrictions put in place.
“For the most part of June and going into July, authorities have gradually eased restrictions, moving from GCQ [general community quarantine] with heightened restrictions, to some, less restrictions for the general community quarantine,” Mapa said.
“Easing curbs will likely translate to faster expansion for the manufacturing sector but we must also note that trends can easily reverse once lockdowns are reinstated with the ECQ [enhanced community quarantine] in April reminding us how quickly the sector can revert to contraction even after three months of gains,” he added.