PH factory sector contracts in April

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The Philippine manufacturing contracted in April as the resurgence of coronavirus disease 2019 (Covid-19) cases prompted factory closures and renewed fall in output, the latest IHS Markit survey revealed.

Results released on Monday showed that the purchasing managers index (PMI) sharply fell to 49.0 from 52.2 in March, signalling a marginal contraction in operating conditions across the manufacturing sector.

Philippine manufacturing was affected by the resurgence of coronavirus cases, causing a fall in output and factory closures. THE MANILA TIMES FILE PHOTO

The PMI takes into account new orders, output, employment, suppliers’ delivery time, and stocks. Readings above 50 signal an expansion; below that, a contraction.

Survey results showed that manufacturers reported a steep decline in output due to the imposition of enhanced community quarantine (ECQ) measures. The rate of decline was the quickest in the survey to date.

IHS Markit said clients suspended their operations with demand faltering for the first time since December last year.

Domestic demand was also subdued with the rate of reduction among the sharpest in the survey.

Higher sales to European markets, however, reportedly led to a softer deterioration in exports.

“April survey data revealed a setback for the Filipino economy, with operating conditions falling back into contraction territory after only one full quarter of growth.

Tightening restrictions led to another round of factory and business closures, with output particularly hard-hit. Meanwhile, labor force cuts extended into the second quarter of 2021,” IHS Markit Economist Shreeya Patel said.

“Supply-side pressures and rising costs were again evident throughout the latest survey period with material shortages and transportation bottlenecks widely reported. Firms will hope that these issues are resolved, but with the full impact of the Suez blockage yet to
take effect, the disruption to global trade is expected to reverberate,” Patel added.

Results of the survey showed that supplier performance severely declined during the month with respondents noting that virus related restrictions had markedly increased lead times and limited raw material availability.

Firms also faced additional surcharges and higher freight costs while input shortages and higher raw material costs were also reported.

Business confidence also dropped to an eight-month low due to the declines in production and new orders.

“On the brighter side, policy-makers have stressed the importance of the vaccination programme in bringing a return to normality and while the initial progression was
somewhat slow, the roll-out seems to have gathered pace in recent weeks,” said Patel.


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