- The Philippine manufacturing sector showed marginal improvement in conditions in October 2021
- Still this is the sector’s strongest uptick in seven months
- The Philippine Purchasing Managers’ Index rose fractionally from 50.9 in September, to 51.0 in October, registering above the 50.0 no-change threshold that separates expansion from contraction
- The goods producing sector was again hit by delivery delays, material shortages and rising costs, which consequently inhibited output growth
The manufacturing sector is expected to grow by 19.1% in 2021.
The Philippine Purchasing Managers’ Index rose fractionally from 50.9 in September, to 51.0 in October, registering above the 50.0 no-change threshold that separates expansion from contraction.
Although only marginal, the latest uptick was the strongest since March, and above the average for 2021 so far, according to the latest survey of London-based IHS Markit.
“October PMI data signalled a slight pick-up in growth across the Philippines manufacturing sector. Some restrictions continued to ease, and the demand environment showed tentative signs of improvement with new orders stabilising after six months of decline,” IHS Markit economist Shreeya Patel said in a statement.
Patel noted, however, that the goods producing sector was yet again hit by delivery delays, material shortages and rising costs, which consequently inhibited output growth.
“Such pressures are likely to persist over the next few months, but a key concern comes from firms only partly able to pass on higher costs given the relatively weak demand environment,” Patel added.
October data indicated a seventh successive monthly fall in output, with the rate of decline quickening from that seen in September, IHS Markit noted.
Firms surveyed mentioned that material shortages and virus-related restrictions drove the decline, though historically weak demand conditions were also cited.
At the same time, new order inflows stabilized after six consecutive months of contraction. International demand, meanwhile, fell modestly in October after stabilizing in September.
Goods producers continued to register a substantial deterioration in vendor performance. Raw material shortages and poor transportation conditions reportedly led to extensive delays.
Lead times have now lengthened in each month since August 2019, with the latest deterioration among the sharpest in the series.
In line with supply chain disruption, firms increased their input buying for the first time since July amid efforts to secure raw materials. The rate of expansion was only fractional though.
Stocks of purchases rose during October, signaling back-to-back expansions. Firms also continued to scale back on their workforce numbers in October, with staffing levels falling for the 20th consecutive month.
On the price front, input prices soared once again during October. Higher cost burdens were commonly linked to material shortages, especially for metals, packaging materials and oil. There were also reports of rising transportation and energy costs.
Subsequently, output charges increased at a quicker pace, though the rate of inflation was much softer than that seen for input prices.
According to anecdotal evidence, some firms held back on raising their charges due to subdued demand conditions.
Business confidence improved to a three-month high at the start of the final quarter of the year, underpinned by hopes of greater international and domestic demand in the year ahead. That said, sentiment was below the long-run series average.
Patel said that after contracting sharply in 2020, the manufacturing sector is expected to grow by 19.1% in 2021.
