Factory output rebounds in January

local manufacturing sector returned to growth territory in January, supported by recovery in domestic demand, according to market intelligence firm IHS Markit.

The headline Philippines Manufacturing index (PMI) rose from 49.2 in December to 52.5 in January, the highest reading in 25 months and firmly above the neutral 50 mark that separates expansion from contraction.

The headline PMI provides a quick overview of the health of the manufacturing sector based on the weighted average of five indicators: new orders (30 percent weight), output (25 percent), job creation (20 percent), supplier delivery times (15 percent) and inventories (10 percent).

The firm said the latest reading signaled a solid uptick in business conditions, indicating a move toward recovery from a pandemicinduced downturn.

“January data indicated a rebound in operating conditions across Filipino manufacturing sector after three successive months of decline,” said Shreeya Patel, economist at IHS Markit.

Improving customer demand led to an uptick in output and new orders while purchasing activity rose for the first time in 11 months.

On expectations of further gains in demand, inventory stocks rose although marginally.

Respondents to the PMI survey mentioned that a recovery in domestic demand drove the uptick because orders from overseas contracted because of strict pandemic restrictions in key export destinations.

However, cost saving efforts by firms led to further staffing cuts at the start of 2021.

Materials shortages also caused the prices of inputs to rise, heightening cost pressures on manufacturers.

This caused them to raise the prices of their products to pass on some of the cost burdens to customers.

“That said, signs of fragility remained evident with staffing cuts and sharp cost pressures mounting. At the same time, virus-related restrictions contributed to substantially longer delivery times and subdued foreign demand,” said Patel.

Despite this, business sentiment remains positive over the next 12 months as firms expect a rise in demand and production.

“Business are hoping for a successful and swift vaccine rollout plan, which is scheduled to begin during the first quarter. Until then, restrictions are likely to stay in place as policy makers seek to contain virus case numbers,” said Patel.