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PH April manufacturing back in contraction due to lockdowns

  • The Philippine manufacturing sector contracted in April 2021 as the resurgence in COVID-19 case numbers led to tighter lockdown restrictions
  • The Philippine Purchasing Managers’ Index registered at 49.0 in April, down sharply from 52.2 as operating conditions across the manufacturing sector contracted marginally
  • Virus-related restrictions markedly increased lead times and limited raw material availability, and consequently, additional surcharges and higher freight costs
  • Declines in production and new orders hit business confidence in April, with the degree of optimism dropping to an eight-month low

The Philippine manufacturing sector fell into contraction in April 2021 as the resurgence in COVID-19 cases led to tighter lockdown restrictions, resulting in many factories suspending their operations and client demand declining sharply.

The Philippine Purchasing Managers’ Index registered at 49.0 in April, down sharply from 52.2 to signal a marginal contraction in operating conditions across the Filipino manufacturing sector.

The headline index dropped below the 50.0 neutral value after three successive months of growth, according to the latest survey of London-based IHS Markit.

“April survey data revealed a setback for the Filipino economy, with operating conditions falling back into contraction territory after only one full quarter of growth. Tightening restrictions led to another round of factory and business closures, with output particularly hard-hit,” IHS Markit economist Shreeya Patel said in a statement.

As lockdown measures tightened, many clients suspended their operations with demand faltering for the first time since December 2020.

IHS Markit said domestic demand was especially subdued with the rate of reduction among the sharpest in the series. However, higher sales to European markets, which have begun to gradually reopen, reportedly led to a softer deterioration in exports.

Goods producers saw another severe decline in supplier performance during April with respondents noting that virus-related restrictions had markedly increased lead times and limited raw material availability. Consequently, firms faced additional surcharges and higher freight costs.

“Firms will hope that these issues are resolved, but with the full impact of the Suez blockage yet to take effect, the disruption to global trade is expected to reverberate,” Patel noted.

A renewed fall in output and new orders led companies to reduce their purchasing activity in April. The rate of decline was the fourth quickest in the series history.

Meanwhile, pre- and post-production inventory growth moderated amid a weaker demand environment and greater raw material costs.

Input shortages and higher raw material costs were widely reported in the latest survey period. Input price inflation accelerated for the sixth month running, with the latest uptick the strongest in over two-and-a-half years. In turn, this reportedly led to a faster uptick in output charges set by manufacturers, as firms sought to partially pass on greater costs to clients.

Declines in production and new orders also hit business confidence in April, with the degree of optimism regarding an increase in output over the coming year dropping to an eight-month low. Despite this, the outlook remained positive overall with mentions of vaccination efforts fueling hopes.

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