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Philippines manufacturing growth stalls in Jan
THE growth of the country’s manufacturing sector stalled in January as the repercussions of Typhoon “Odette” and the surge of Covid-19 cases affected output and new orders, results of the latest IHS Markit survey showed.
Survey results released on Wednesday showed that the purchasing managers index (PMI) fell from 51.8 in December to 50 in January.
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 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,” said IHS economist Shreeya Patel.
“Anecdotal evidence suggested both factors weighed heavily on both domestic and international demand as well as firms’ ability to produce goods. Material shortages and delivery delays were also prominent, continuing pressure on vendor performance,” she added.
Output fell at the quickest rate in five months, which firms attributed to pandemic restrictions, lack of raw materials and adverse weather conditions.
Demand also declined due to tighter restrictions and higher prices of goods. International demand likewise fell at the fifth-quickest rate as the pandemic and typhoon weighed on sales to foreign markets.
As output and new orders declined, firms marginally reduced work forces.
In terms of prices, material shortage continued to push up expenses during the month that led firms to raise their selling charges “at the quickest rate for seven months in a bid to protect profit margins.”
IHS Markit said the drop in production and new orders affected business confidence, adding that the lasting effects of the pandemic and the typhoon resulted in a moderation in sentiment.
“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,” said Patel.
In a separate comment, ING Bank Manila senior economist Nicholas Mapa said the less optimistic outlook of manufacturing firms will be reflected in the Bangko Sentral ng Pilipinas’ consumer and business sentiment’s interviews for the first quarter.
“If for anything, the Omicron variant was a stark reminder that the pandemic was not over just yet and that new variants, less fatal or otherwise, could still have a material impact on the growth outlook,” said Mapa.
Mapa believes that while the government downplayed the impact of the recent Omicron surge, “the initial estimation that Omicron would have no material impact on growth momentum may have been overly optimistic.”
“Thus future growth aspirations and outlook will need to always consider the possibility of a return to tighter mobility curbs during episodes of virus waves,” he said.
Economic managers set a 7- to 9-percent economic growth target this year. In 2021, the economy grew by 5.6 percent which is slightly above the 5.0 to 5.5 percent target.
Socioeconomic Planning Secretary Karl Kendrick Chua earlier disclosed that despite the surge in Covid-19 cases last month, they are optimistic that the Philippine economy is still poised to return to its pre-pandemic level this year.
Source: https://www.manilatimes.net/2022/02/02/news/ph-manufacturing-growth-falls-in-jan/1831524