Manufacturing growth picked up in March

Manufacturing growth picked up in March but the first-quarter average Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI) slid to its lowest in two years partly due to the impact of the Tax Reform for Acceleration and Inclusion (TRAIN) Act.

Last month, the seasonally adjusted PMI inched up to 51.5 from 50.8 in February, global research firm IHS Markit said in a report Monday.

A PMI score of above 50 indicates an overall increase in manufacturing activity.

In a note to clients Monday, London-based Capital Economics noted that the Philippines and Myanmar were the only countries whose March PMI figures rose from their February numbers.

Also, the Philippines, Indonesia and Myanmar were the few countries in the region whose headline PMIs in March exceeded their end-February average, Capital Economics added.

However, “the Philippines’ manufacturing growth is on course for its weakest quarterly gains in the survey history, according to the Nikkei PMI data” or since January 2016, IHS Markit principal economist Bernard Aw said in a statement.

The Philippines’ PMI score in January this year dropped to 51.7 from 54.2 in December last year.

“Effects of the recent changes to excise taxes continued to be felt on the price front. Inflation of both input costs and output prices reached new survey-record rates,” IHS Markit said, referring to the TRAIN Law.

Signed by President Duterte in December, Republic Act No. 10963 or the TRAIN Law since Jan. 1 this year jacked up or slapped new excise taxes on oil, cigarettes, sugary drinks and vehicles, among other goods, to compensate for the restructured personal income tax regime that raised the tax-exempt cap to an annual salary of P250,000.

Aw nonetheless said that “the rise in the headline index [in March] points to signs that the adverse impact on demand from the new excise taxes could be fading.”