Manufacturing growth stalled at the start of the year, amid the surge in coronavirus cases and also due to typhoon Odette, according to a report released by IHS Markit yesterday.
The IHS Markit Philippines manufacturing purchasing managers’ index (PMI) fell from 51.8 in December to 50 in January, registering at the no-change threshold that separates expansion from contraction.
“The latest result brought an end to four successive months of growth amid the impact of the typhoon, material scarcity and the pandemic,” the report said.
Trade Secretary Ramon Lopez said the PMI 50 reflects the huge impact of typhoon Odette in the Visayas, Palawan and Northern Mindanao as it damaged manufacturing capacities and loss of basic utilities such as power and water covered a very wide area for more than a month.
Lopez said the surge in cases of highly transmissible Omicron variant likewise affected production operations as many workers and their families got infected and were forced to isolate or quarantine.
“These factors are now getting resolved and on Omicron, we are seeing a downward trend, so we can expect an improvement in the PMIs in the months to come. The new major economic reforms or those being finalized such as the Retail Trade Liberalization Act, the Foreign Investments Act and the Public Service Act are expected to attract more investments that will generate more production activities and jobs
The report said output fell at the quickest rate for five-months while new orders declined marginally.
It added that tighter restrictions paired with higher prices for goods resulted in a weak demand environment.
“With the exception of the marked contractions seen in mid-2020, the latest decline was among the strongest in the survey’s six-year history, despite being only modest overall,” the report said.
“The latest PMI data revealed an unfortunate start to the year for the Philippines manufacturing sector, with the surge in case numbers and typhoon Odette hitting large parts of the nation. Anecdotal evidence suggested both factors weighed heavily on both domestic and international demand as well as firms’ ability to produce goods,” Shreeya Patel, economist at IHS Markit, said.
Patel added that material shortages and delivery delays were also prominent, continuing pressure on vendor performance.
“That said, there were signs of resilience. Employment fell at one of the softest paces in almost two years, and price pressures started to ease. In addition, firms looked to increase their selling prices at a quicker rate in a bid to protect profits,” Patel said.
“Whilst the full impact of the typhoon and the Omicron variant are unknown, it’s clear production will certainly be impacted in the coming months as companies adapt once again.
Firms will hope for a quick recovery and remain prepared through advance ordering strategies,” Patel added. With IRMA ISIP
