Manufacturing sector starts to pick up

Manufacturing picked up in September for the first time since the Philippines imposed lockdown protocols to contain COVID-19 in March, the latest purchasing managers’ index (PMI) released on Thursday showed.

In a report, London-based global information provider IHS Markit Ltd. said the Phili­ppines’ PMI increased to 50.1 last month from 47.3 in August, putting a halt to six straight months of contraction.

A PMI above the neutral 50-mark meant there was a year-on-year rise in manufacturing activities, which was last seen in February with 52.3—before the COVID-19 quarantine started.

“September data indicated that operating conditions faced by Filipino manufacturing firms were broadly stable. New orders rose for the first time since February, led by improving customer demand as more parts of the economy reopened follo­wing the easing of COVID-19 restrictions,” IHS Markit said.

Total output of the country’s factories was still lower year-on-year last month, but IHS Markit said the decline was only “marginal” and was the slowest pace in three months.

“According to firms, the ongoing restrictions related to the COVID-19 pandemic continued to limit the performance of the sector, with some businesses forced to pare down operations,” IHS Markit economist Shreeya Patel said.

As such, IHS Markit said “employment continued to fall markedly, which manufactu­rers often linked to the nonreplacement of voluntary leavers and sufficient capacity.”

“On a more hopeful note, stronger business sentiment and efforts to rebuild stocks suggest panelists are preparing for an improvement in demand over the coming months, although optimism continues to rest on the development of the pandemic,” Patel said.

Business sentiment among the manufacturers IHS Markit polled in September was the highest since February, even as production costs remained high.

“Higher transportation costs, material shortages and reports of supplier surcharges related to COVID-19 resulted in a solid increase in cost burdens during September. Manufacturers had some difficulty passing on higher costs to clients due to tough market competition, however, with factory gate charges rising only marginally,” IHS Markit said.