Manufacturing contracts in Dec

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    The manufacturing sector deteriorated in December, still due to restrictions implemented to address the spread of the coronavirus disease 2019 (COVID-19) pandemic, IHS Markit said in its report released yesterday.

    The IHS Markit Philippines manufacturing purchasing managers’ index fell to 49.2 in December from 49.9 in November, posting below the 50 neutral value that separates expansion from contraction.

    The report said the latest reading signaled a marginal deterioration in manufacturing conditions in December.

    Ongoing lockdown restrictions and poor weather contributed to a decline in output volumes in December, IHS Markit said, adding that although modest, the rate of decline was among the fastest in the series history.

    “December data was indicative of another contraction in operating conditions across the Filipino goods-producing sector. The pandemic, and ongoing restrictions have hit manufacturers hard, impacting both demand and output, which remained historically weak,” Shreeya Patel, economist at IHS Markit, said in the report.

    “The addition of material shortages and supply chain pressures placed pressure on operating conditions, whilst reduced output led to another month of sharp job cuts,” Patel added.

    The report said new orders were broadly unchanged in the final month of 2020, with firms mentioning that ongoing pandemic restrictions weighed on domestic demand.

    “Demand from abroad continued to expand, however, with exports rising for the fourth month running. Greater demand for Filipino products in key export markets were reported by panelists,” the report said.

    “The downturn in production, and muted demand conditions led firms to cut workforce numbers in the final month of 2020. Job shedding persisted at a strong rate which firms linked to restructuring efforts and voluntary resignations. Reflecting weaker demand conditions, survey data continued to show signs of spare capacity as backlogs of work fell further,” it added.

    IHS Markit said a combination of material shortages and COVID-19 restrictions contributed to another monthly deterioration in vendor performance.

    “That said, positives can be drawn from the latest survey findings; new orders neared stability and sentiment recovered to levels seen before the start of the pandemic. At the same time, case numbers have moderated with expectations that restrictions will ease over the coming months,” Patel said.

    “Although the latest overall sector contraction was only marginal, domestic demand remains challenging which may stymie progress on the lengthy road to recovery,” Patel added.