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PH manufacturing down fractionally in March

  • The Philippine Purchasing Managers’ Index was at 52.2 in March 2021, down slightly from 52.5 in February
  • The latest reading indicates modest improvement in the health of the manufacturing sector with growth registered throughout the first quarter of 2021, according to IHS Markit
  • IHS Markit said the first-quarter performance places the manufacturing sector in good stead for a return to industrial production growth in 2021

The Philippine manufacturing sector ended the first quarter on a positive note, with the Philippine Purchasing Managers’ Index at 52.2 in March, just down fractionally from 52.5 in February, according to the latest survey of IHS Markit.

A PMI above 50 separates expansion from contraction.

“The Philippines manufacturing sector ended the first quarter on a positive note with a modest expansion recorded in March. Promisingly, output volumes rose despite a moderation in new order growth. Meanwhile, employment levels fell only marginally with anecdotal evidence suggesting that this was mostly voluntary, and not due to cost-cutting efforts at firms,” IHS Markit economist Shreeya Patel said in a statement.

Rising prices are a key area of concern though, she said. “Material shortages were often blamed for the higher costs incurred by firms. A sustained increase in client demand, however, allowed some firms to partially pass on rising expenses” by increasing factory-gate prices.

The rate of output price inflation was robust overall, and the sharpest since November 2018.

Goods producers reported a marginal rise in new order volumes during March. The rate of expansion, however, softened from that seen in February and was weaker than the long-run average.

IHS Markit said an overall rise in new work led Filipino manufacturers to increase their output, and at an accelerated pace. The rate of growth was moderate but was the fastest since June 2019. Some firms noted efforts to stockpile finished goods amid expectations of greater demand in the months ahead.

Foreign client demand, meanwhile, was especially subdued during March as restrictions linked to the COVID-19 pandemic persisted in overseas markets.

Supply chain pressures continued to build in March as lead times for inputs lengthened.

IHS Markit said survey panelists continued to cite freight delays as driving the deterioration in vendor performance, with delivery times lengthening markedly. As such, firms sought to increase their inventory holdings to minimize future shortages due to delays.

The outlook for production remained in positive territory in March, with hopes of stronger economic conditions often linked to positivity. However, the degree of optimism posted below the long-run trend, suggesting that the global pandemic continues to weigh on expectations.

“Nevertheless, a strong first quarter places the sector in good stead for a return to industrial production growth in 2021, with our current forecast expecting a 7.1% expansion,” Patel said.

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