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Philippines: Omicron, ‘Odette’ aftermath foil factory output’s ascent in January
MANILA, Philippines — Local factories face a tough road ahead as it looks to pave a clearer path to recovery from the aftermath of Typhoon “Odette” and the Omicron variant surge, both of which stalled production in January.
British information provider IHS Markit reported the Philippines’ purchasing managers’ index (PMI), a measure of manufacturing output, dropped to 50.0 in January from 51.8 in December, snapping four straight months of increase.
The latest print — a result of a monthly survey of around 400 firms — landed squarely in the 50 no-change thresholds separating expansion from contraction. “Anecdotal evidence suggested both factors weighed heavily on both domestic and international demand as well as firms’ ability to produce goods,” said Shreeya Patel, an economist at Markit.
“Material shortages and delivery delays were also prominent, continuing pressure on vendor performance,” Patel added.
A month after PMI’s resurgent performance in December, Markit noted local factories witnessed sharp declines in output in January, the quickest in five months, as the sector was left reeling from the effects of the Omicron variant wave and Odette’s devastation. The local manufacturing sector noted domestic lockdowns, adverse weather conditions, and a scarcity of raw materials that led to the drop.
The reduction on new orders from local producers was equally worrying, according to Markit. This was the strongest decline they recorded in the survey’s six-year history. International demand suffered losses as it sagged at the fifth-quickest pace due to those twin effects.
Markit said firms pumped up prices to consumers at the fastest pace in seven months since they wanted to shield profit margins from unwarranted declines. In an emailed commentary, Nicholas Antonio Mapa, senior economist at ING Bank in Manila, said high prices would likely persist this year.
“The only component of January’s PMI report that increased were prices as firms passed on the higher cost of production to consumers suggesting that price pressures would pervade going into 2022,” Mapa said.
“With most of the capital region shuttered, either voluntarily on involuntarily, for a month we do believe that the initial estimation that Omicron would have no material impact on growth momentum may have been overly optimistic,” he added.
At the same time, global supply chain disruptions remain a reality for the local manufacturing sector. Companies polled reported that on top of shortage of raw materials, they had to increase lead times for orders and had to pay more for freight costs and surcharges.
For Patel, there were still bright spots, such as the softer pace of job shedding in factories last month, albeit a sustained trend in 23 months now.
Mapa pointed out that this output slump could prove temporary. “Despite this recent disruption, firms remain optimistic that the Omicron wave and the fallout from Odette will be short-lived, a speed bump that merely saps some momentum but is unable to change the overall growth narrative,” he added.
Source: https://www.philstar.com/business/2022/02/02/2158061/omicron-odette-aftermath-foil-factory-outputs-ascent-january