Signs of economic recovery emerge

The manufacturing sector started 2021 on a good footing as recovering domestic demand pushed the purchasing managers’ index (PMI) to a 25-month high in January.

In a report on Monday, London-based global information provider IHS Markit Ltd. said the Philippines’ PMI improved to 52.5 last month, reversing three straight months of decline.

A PMI above the neutral 50-mark meant there was a year-on-year increase in manufacturing activities, which was last seen in September 2020’s 50.1.

IHS Markit said the January PMI “signaled a solid uptick in business conditions, indicating a move toward a recovery from the downturn [caused] by the COVID-19 pandemic.”

“Improving customer demand led to an uptick in output and new orders while purchasing activity rose for the first time in 11 months. In anticipation of further gains in demand, stocks of purchases and post-production inventories rose marginally. Meanwhile, sentiment regarding output over the next 12 months remained positive with improving new order volumes fueling optimism,” IHS Markit said.

‘Signs of fragility’

IHS Markit economist Shreeya Patel attributed January’s PMI rebound to the business sector’s expectations of a “successful and swift” mass vaccination starting the first quarter.

But Patel warned that the manufacturing sector’s recovery was still fragile as quarantine restrictions remained prolonged while the deadly coronavirus continued to be a threat to lives and livelihoods.

“Signs of fragility remained evident with staffing cuts and sharp cost pressures mounting. At the same time, virus-related restrictions contributed to substantially longer delivery times and subdued foreign demand,” Patel said.

IHS Markit said manufacturers undertook some additional job cuts at the beginning of the year as they tried to save on costs, although the number of workers laid off was an 11-month low.

Raw materials were also facing supply shortages such that suppliers jacked up prices of manufacturing inputs at the fastest pace in more than two years, IHS Markit said, adding that “output charges rose with firms passing on part of the hike in cost burden to clients.”

In a report, RCBC chief economist Michael Ricafort said the surprise improvement in January PMI “could suggest further pick up in business/economic activities as sustained even after the Christmas season in December 2020.”

“For the coming months, possible easing of Metro Manila’s GCQ (general community quarantine) since June 2020 to MGCQ (modified general community quarantine) would help further reopen the economy by way of higher capacity for many busineses/industries, which may lead to a further pick up in manufacturing activities as well,” Ricafort said. INQ