The local manufacturing output made a sharp U-turn last month due to tighter lockdown restrictions amid efforts to control the country’s worst coronavirus surge, the latest monthly survey of IHS Markit revealed.
The IHS Markit Philippines Manufacturing Purchasing Managers’ Index (PMI) dropped below the 50.0 neutral threshold in April, ending its three consecutive months of expansion. The headline index was registered at 49.0, down sharply from 52.2 in March.
The renewed contraction in output levels was seen across the goods-producing sector during month, IHS Markit said.
“Manufacturers in the Philippines highlighted a steep decline in output at the start of the quarter, which was largely attributed to enhanced community quarantine (ECQ) measures, undertaken to control the spread of the disease,” IHS Markit said.
According to the survey, the rate of decline in April was solid, and among the quickest in the survey to date. Many factories had suspended their operations, and client demand declined sharply following a resurgence in COVID-19 case numbers.
“Lower output requirements led to a 14th consecutive reduction in employment while material shortages added to delivery delays,” IHS Markit said. “The 12-month outlook for output slipped further at the start of the quarter and was among the weakest in the series history.”
However, higher sales to European markets which have begun to gradually reopen, reportedly led to a softer deterioration in exports last month.
But firms still scaled back on their hiring efforts during the month with a weak demand environment and voluntary resignations often mentioned as driving the decline in employment.
IHS Markit surveys have seen job shedding in each month since February last year, with the latest decline the quickest in four months.
In addition, goods producers saw another severe decline in supplier performance in April with respondents noting that virus-related restrictions had markedly increased lead times and limited raw material availability.
Consequently, firms faced additional surcharges and higher freight costs.
"April survey data revealed a setback for the Filipino economy, with operating conditions falling back into contraction territory after only one full quarter of growth,” Shreeya Patel, IHS Markit economist said. Despite the contraction, IHS Markit said overall manufacturers outlook remained positive, saying that vaccination efforts are fuelling the sector’s hopes.