Philippines manufacturing weakens in April

MANILA, Philippines — Domestic manufacturing conditions weakened in April as output sank to a 19-month low, according to the latest Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI).

The headline PMI for the Philippines weakened from 51.5 in March to 50.9 in April, the lowest reading in nine months.

This is already approaching contraction level as a reading below 50 indicates deteriorating business conditions.

The headline PMI provides a quick overview of the health of the manufacturing sector based on output, new orders, job creation, inventories and delivery times.

Output growth during the period was subdued as new orders rose at the slowest pace in nine months “as demand from overseas saw a moderate decline,” said IHS Markit, the firm which compiled data for the PMI.

Firms thus reduced the number of workers for the second consecutive month and decreased the purchase of inputs.

As a result, prices of finished goods rose modestly during the month due to lower input cost.

“Only a small proportion of firms raised prices, mostly relating this to higher raw material costs. On the flip side, some businesses lowered fees to remain in line with global prices,” the report said.

Among the five indicators, improvement was seen only in supplier delivery times as businesses reported shorter delays in the delivery of imported materials because of the port congestion in Manila.

 “April PMI revealed an even more subdued picture for the Philippines. With first quarter results already reflecting weaker manufacturing growth than at the end of last year, the latest data did little to raise hopes for the second quarter. Output expanded at the weakest rate since September 2017, while new order growth was dampened by a quicker drop in export sales,” said IHS Markit economist David Owen.

“There was some positive news from the survey as firms reported an alleviation of import delays due to the recent port congestion at Manila. This led to the first improvement in supplier delivery times in nine months, although slowing output growth still led manufacturers to reduce stock levels,” he added.

The Philippine manufacturing sector was the fourth best performer in ASEAN during the month.

Even at the regional level, marginal improvements were seen in manufacturing activity.

The headline Nikkei ASEAN Manufacturing PMI rose to 50.4 in April from 50.3 in as slight uplift were seen in output and new orders.

Some manufacturers across the region also increased the number of workers to cope with the increase in demand. Input buying, however, remained subdued.

“The ASEAN PMI notched up fractionally at the start of the second quarter, indicating another subdued expansion in the manufacturing sector. While output grew at a quicker rate, the rise was still weaker than those seen at the end of last year. Moreover, the increase was centered on Myanmar and Thailand, with all other countries seeing either softer growth or an overall decline,” Owen  said.

“With discussions continuing between the US and China, firms will be hopeful that these will lead to reduced pressure from tariffs. Either way, markets in the region appear to be opening up at the start of the second quarter, which could hopefully fuel stronger growth in the months to come,” he added.