The country’s manufacturing sector inched towards stabilization in May, as strict quarantine measures recently implemented in the National Capital Region (NCR) and adjacent provinces were eased.
The IHS Markit Philippines manufacturing purchasing managers’ index (PMI) rose to 49.9 in May, from 49 in April, posting just below the 50 neutral value that separates expansion from contraction.
To recall, the surge in coronavirus disease 2019 cases sometime in late March led to tighter quarantine restrictions in the NCR Plus area, which prompted some factory closures and a renewed fall in manufacturing output in April.
However, the restrictions in NCR Plus were shifted to the more relaxed general community quarantine from mid-May.
With the downgrading of quarantine levels, IHS Markit said in its report that factories were able to resume their operations and reduce backlogs of work further, thus some firms were able to meet new orders.
“May PMI data will therefore be welcomed as it revealed a swift movement towards stabilisation with some businesses already resuming their operations,” Shreeya Patel, IHS Markit economist, said in the report.
“Softer declines in output and new orders signalled a step in the right direction, whilst a renewed increase in overseas demand also supported the sector,” Patel added.
The report said supply chain pressures remained evident however, with delivery times lengthening markedly. Firms looked to mitigate the effects of longer lead times by building safety stocks, it added.
“That said, whilst firms continue to reduce outstanding business, they are facing strong inflationary pressures. Transportation bottlenecks and limited material availability weighed somewhat on profit margins. An increase in selling charges and cuts to workforces suggests firms are seeking to control soaring expenses,” Patel said.
“Nevertheless, policy-makers are working towards securing enough vaccines to inoculate a large proportion of the population. The rollout must gain momentum to prevent another tightening of measures and to encourage an economic recovery, however,” Patel added.
