PMI marginally slides to 3-mo low in March

Philippine manufacturing posted a moderate pickup in March, with the purchasing managers index (PMI) posting a three-month low of 52.2, the latest IHS Markit survey revealed.

Results released on Monday showed the indicator slightly slipped from 52.5 in February, but surged from the 39.7 a year earlier.

The latest figure, however, was the lowest since the 49.2 logged last December.

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 reading was indicative of a modest improvement in the health of the manufacturing sector with growth registered throughout the first quarter of 2021,” IHS Markit explained in a report.

It said goods producers reported a marginal upturn in new order volumes last month.

“That said, the rate of expansion softened from that seen in February and was weaker than the long-run average,” it added.

Meanwhile, IHS Markit added restrictions related to the coronavirus disease 2019 pandemic continued in markets abroad that softened foreign client demand during the month.

However, some firms noted efforts to stockpile finished goods amid expectations of greater demand in the months ahead.

IHS Markit added that resignations curbed, which contributed to a marginal decrease in workforce numbers.

“Firms were nevertheless still able to clear their backlogs of work, with the rate of depletion in outstanding business sharp overall,” it also emphasized.

Supply chain pressures also continued to build in March as lead times for inputs extended.

“Panelists continued to cite freight delays as driving the deterioration in vendor performance, with delivery times lengthening markedly,” IHS Markit emphasized.

As such, companies sought to expand their inventory holdings to reduce future shortages due to delays.

IHS Markit further said substantial output and expectations of an improvement in demand conditions encouraged firms to raise their purchasing activity. As well as improving pre-production inventories, businesses also expanded their stocks of finished goods.

Cost burdens faced by Filipino goods producers also shot up at a sharp and faster pace. Companies linked higher costs to shortages of raw materials.

“Firms chose to partially pass on rising expenses by increasing factory-gate prices. The rate of output price inflation was robust overall, and sharpest since November 2018,” IHS Markit highlighted.

In February, the Philippine headline inflation rate jumped to an over two-year high of 4.7 percent on the back of higher pork prices in areas outside Metro Manila.

Lastly, IHS Markit said the outlook for production remained in positive territory in March, with hopes of stronger economic conditions often linked to positivity.

“However, the degree of optimism posted below the long-run trend, suggesting that the global pandemic continues to weigh on expectations,” it noted.