PH factory output down in May

THE Philippine manufacturing sector continued to contract in May but at a slower pace compared to the record low in April, an IHS Markit survey showed.

Survey results released on Monday showed that the Purchasing Managers Index (PMI) rose to 40.1 in May compared to 31.6 in April.

IHS Markit said that despite the improvement, the reading still pointed to a sharp deterioration in operating conditions across the

country’s manufacturing sector.

The PMI takes into account new orders, output, employment, suppliers’ delivery time and stocks. Readings above 50 signal an expansion; below that, a contraction.

“The Philippines PMI signalled a softer decline in operating conditions across the manufacturing sector in May. The headline index picked up and was much higher than in April when the lockdown had its greatest impact on production,” said IHS Markit economist Dawid Owen.

Survey results showed that production levels were subdued due to the continued implementation of lockdown measures.

It said, however, that the partial easing of restrictions in rural areas led to a less severe decline than that seen in April, with some businesses able to restart their operations.

“That said, ongoing social distancing led to capacity being much lower than normal, while weak new order volumes often discouraged firms from raising output,” said IHS Markit.

Demand for manufactured goods also continued to fall but at a softer pace compared to April. Weaker sales both in local and in international markets were also recorded as foreign clients remained under lockdown measures.

IHS Markit also reported that deliveries in input materials were delayed due to travel restrictions and more frequent checkpoints.

Employment, meanwhile, was also reduced for the fourth time this year on the back of weaker sales and restrictions to output.

“Employment continued to drop amid excess capacity, further hampering demand conditions,” said Owen.

“Price pressures began to inflate in May after marked decreases during March and April. Raw material prices rose slightly as reductions in global supply started to outweigh weaker demand and lead to difficulties in acquiring inputs. Output prices also increased, but firms tried to keep charge inflation low, hoping this would encourage an improvement in sales once demand conditions have returned to normal,” he added.

In terms of outlook on output, IHS Markit said that firms are more optimistic as they were encouraged by the partial easing of lockdown measures and coronavirus disease 2019 cases being kept under control.

Firms hoped that the introduction of new products would also drive activity higher.