PH's high COVID-19 cases weaken factory output
The Philippines’ manufacturing activity contracted anew in October as operating conditions across manufacturing companies worsened as the economic fallout from the coronavirus disease (COVID-19) pandemic persisted.
After breaching the 50-neutral mark for the first time in seven months in September, the IHS Markit Philippines Manufacturing Purchasing Managers’ Index (PMI) slipped to 48.5 last month after firms saw a renewed fall in new orders.
Shreeya Patel, IHS Markit economist, said that weak client demand in domestic markets, a sharp contraction in employment and lower production weighed on the health of the sector, causing the overall PMI figure to drop.
Despite efforts to reopen the economy, Patel noted that the country’s high COVID-19 inflection rates compared with its regional peers continue to dampen consumer sentiment domestically.
“Until virus cases are tamed domestically and globally, we are likely to see a protracted recovery in manufacturing production,” Patel said in a statement.
"For now, firms remain optimistic that production will improve over the coming year, however, it remains to be seen whether the latest contraction was temporary,” she added.
In October, the government allowed more businesses to resume operations and more people to leave their residences, although health and safety protocols remain as the country continues to log coronavirus infections.
Manufacturers saw a decline in new orders at the start of the final quarter of 2020 amid subdued domestic demand which firms linked to the overall COVID-19 situation.
“Firms reporting a downturn overwhelmingly attributed it to weaker demand conditions,” IHS Markit said, but noted “the rate of contraction was only marginal and much slower than the substantial decline seen in April.”
Reflective of lower new orders, local manufacturers firms have reduced staffing levels sharply in October for the eighth consecutive month as well as stores of inputs.
On the price front, input costs faced by manufacturers rose, with higher raw material costs and supplier surcharges contributing to inflation.
But despite renewed deterioration in manufacturing sector, IHS Markit said that business expectations for the coming 12 months were positive in October, but that degree of confidence was below the long-run average.
“Some firms continue to expect that COVID-19 will have a long-term impact on production,” the report said.
Along the Philippines, the downturn in the Southeast Asia manufacturing sector continued into last month at 48.6, below the crucial 50 threshold that separates expansion from contraction.
The sharpest contraction was recorded in Myanmar (30.6), followed by Indonesia (47.8), and Malaysia (48.5). Only Vietnam (51.8) and Singapore (52) breached the 50 threshold.