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Philippines: Tax increases weigh on manufacturing industry
THE Philippines’ manufacturing PMI remained positive in January but the latest reading signaled a slowdown due to the impact of higher taxes on both output and new orders.
Results of an IHS Markit/Nikkei survey released on Thursday showed a seasonally adjusted Purchasing Managers’ Index of 51.7 for the month, lower than December’s 54.2 and the 53 posted a year earlier.
“While the Philippines manufacturing economy ended last year on a high, it started 2018 on a more modest note as demand was partially hurt by the new excise taxes,” IHS Markit economist Bernard Aw said.
The PMI is a composite index representing the weighted average of five sub-components: new orders, output, employment, suppliers’ delivery time and stocks. Readings above 50 signal an expansion while readings below 50 signal a contraction.
January data suggested that demand was partially hit by higher excise taxes that took effect at the start of the month.
Under the Tax Reform for Acceleration and Inclusion Act, excise taxes were raised for petroleum products, coal, automobiles and cigarettes while a new excise tax on sugar-sweetened beverages was introduced.
“Growth in both output and new business saw a marked slowdown in January, alongside the weakest rise in employment growth since the declines recorded last summer,” Aw noted.
However, “other survey indicators suggest that firms are likely to look past the near-term slowdown towards stronger growth in the year ahead.”
The 12-month outlook for production remained buoyant with optimism linked to higher sales projections, greater operating capacity, new product models, planned business expansions and a robust economic outlook.
“However, one area of concern is the renewed pick- up in price pressures, which could pose as a downside risk to future growth,” Aw said.
Supply-side factors were responsible for higher prices, with input cost inflation accelerating to one of the highest rates in the survey series with firms blaming new excise taxes as the key driver.
Reasons cited also included a weaker exchange rate and higher world commodity prices. Rising costs led companies to raise their selling prices sharply and at the quickest rate on record.
“Given the strong relationship between PMI’s gauge of input prices and official consumer inflation data, we could see stronger consumer price pressures in early 2018,” Aw said.
Source: http://www.manilatimes.net/tax-increases-weigh-manufacturing-industry/377670/