Manufacturing back to expansion mode in Sept

The manufacturing sector resumed expansion in September as quarantine curbs were gradually lifted, but global supply constraints and expensive inputs pose a threat to sustained recovery.

The September purchasing managers’ index for the Philippines released by London-based global information provider IHS Markit Ltd. on Friday showed the PMI at a six-month high of 50.9, reversing the contraction in August when Metro Manila was placed on two weeks of the strictest enhanced community quarantine (ECQ).

A PMI of above 50 meant improvement in overall manufacturing activities.

“After a tough trading period in August, manufacturers in the Philippines welcomed the relaxation of some virus-related restrictions. A number of factories and businesses resumed their operations; however, the domestic and international demand environment remained challenging,” IHS Markit economist Shreeya Patel said.

IHS Markit said pandemic-induced declines in output, new orders, input purchasing as well as employment were slower in September even as firms resumed stockpiling ahead of expected bigger demand before yearend.

Job shedding

“Job shedding persisted, but anecdotal evidence highlighted that this was mostly voluntary. Nevertheless, backlogs fell solidly, which could result in efforts to rein in spending and cut headcounts until demand for Filipino-manufactured goods improves,” Patel added.

Patel said global supply shortages due to international COVID-19 restrictions lengthened delivery times such that raw material prices also jumped. “Unfortunately, firms will have to endure the disruption as supply pressures show no signs of slowing.”

Hampered production

IHS Markit said “remaining COVID-19 restrictions hampered production,” citing feedback from domestic manufacturers.

While “sentiment was widely upbeat, and improved from that in August amid global vaccination efforts,” IHS Markit said that Philippine-based manufacturing firms “remained skeptical of the longer-term implications of COVID-19 with optimism historically subdued.”

In a Sept. 30 report, the Development Budget Coordination Committee (DBCC) said that “downside risks for economic recovery remain high as growth prospects will be greatly dependent on the evolution of the virus and the rollout of vaccines.”

“There is still a high level of uncertainty, which has continued to weigh down consumer and business sentiments,” the DBCC said.