Local factory output slid to a 15-month low in August following the reimposition of the strictest community quarantine, the latest monthly survey conducted by IHS Markit revealed.
The IHS Markit Philippines Manufacturing PMI fell sharply from 50.4 in July to 46.4 las month, registering below the 50.0 no-change threshold that separates expansion from contraction.
“The latest decline indicated a renewed contraction in operating conditions in the Philippines manufacturing sector, and one which was the steepest since May last year,” IHS Markit said.
Shreeya Patel, IHS Markit economist said the latest contraction in operating conditions in the manufacturing sector came as no surprise.
Patel explained that factories and their clients in the Metro Manilla had paused their production lines in a bid to curb the spread of the new Delta variant.
“Consequently, all five of the PMI components worsened, or fell deeper into contraction territory, with the PMI at a15-month low in August,” she said.
Production volumes fell for the fifth straight month.
Customer demand also fell sharply with the volume of new orders declining at one of the quickest rates in the series history.
In addition, lower output requirements led to sharp declines in purchasing activity. As a result, inventories of pre- production goods fell, although only moderately.
Likewise, employment levels at Filipino goods-producers dropped at a sharp and accelerated pace in August. This was largely attributed to factory shutdowns which meant employees were unable to work, leading to reports of resignations and layoffs.
But on a brighter note, Patel noted that firms’ expectations towards the outlook remained optimistic owing to hopes that the latest downturn is only temporary.
"Looking at prices, easing input costs suggests that the sharp price pressures seen since the start of the year are starting to ease,” Patel said.
"As with all regions, vaccinations remain paramount to controlling the spread of the disease and the associated variants. Policymakers have once again re-iterated the importance of inoculating the population, which it endeavours to do by early next year,” she added.
Firms will hope shocks to the supply of vaccines are brought under control to prevent this being pushed back again, Partel said.