Manufacturing declined anew in May
Manufacturing shrank for the third straight month in May, although slower as the government eased lockdown restrictions especially in the country’s virus epicenter.
The latest manufacturing purchasing managers’ index (PMI) released by London-based global information provider IHS Markit Ltd. on Monday showed an improvement to 40.1 last month from the record low 31.6 posted in April.
A PMI below the neutral 50-level meant a manufacturing decline, which the Philippines had been recording since March.The government imposed an enhanced community quarantine over Luzon, including the National Capital Region, beginning March 17 to contain the spread of the new coronavirus disease (COVID-19).
Some restrictions were eased beginning May as the country sought to reopen its recession-hit economy.
“The easing of measures in some regions helped the rate of contraction in production soften from April,” IHS Markit said.
While areas with high COVID-19 cases were kept under modified enhanced community quarantine in mid-May, a less restrictive general community quarantine covered areas with low infections.
“Production levels were subdued due to lockdown measures remaining broadly in place across the Philippines. However, reports of the partial easing of restrictions in rural areas led to a less severe decline than that seen in April, with some businesses able to restart operations. That said, ongoing social distancing led to capacity being much lower than normal, while weak new order volumes often discouraged firms from raising output,” IHS Markit added.
It noted orders from both domestic and export markets remained subdued as the pandemic took its toll on the global economy.
“Demand for manufactured goods continued to fall during the month, with the latest decrease softer than that seen in April but still the second-sharpest since the series began in January 2016,” IHS Markit noted.It said employment levels also fell sharply as purchases declined.
“Employment was reduced for the fourth time in five months during May. Businesses largely related the fall to weaker sales and restrictions to output, with many panelists operating with minimal employee numbers. The fall in new orders meant that capacity to complete backlogs remained sufficient, although outstanding work dropped only marginally and at the softest pace in over four years,” IHS Markit said.
IHS Markit economist David Owen also noted inflation picking up in May.
“Raw material prices rose slightly as reductions in global supply started to outweigh weaker demand and lead to difficulties in acquiring inputs. Output prices also increased, but firms tried to keep charge inflation low, hoping this would encourage an improvement in sales once demand conditions have returned to normal,” Owen said. INQ
