No holiday cheer for factories as slump worsens in December

MANILA, Philippines — The coronavirus pandemic was the Grinch that stole Christmas from local factories in December, capping the year on a sour note on the back of falling output and shrinking workforce.

Results of a monthly survey of 400 companies showed the Philippines’ purchasing managers’ index — a measure of manufacturing output — plummeted to 49.2 in the final month of the year from 49.9 in November, IHS Markit, a British information provider, said in a report on Monday.

While “modest,” the rate of decline in December was among the fastest in the survey’s history, IHS Markit said.

That the latest reading further sank below the 50 level that separates growth and slump means a typical surge in demand during the holiday season was not enough to bring output back to the positive territory before the year ended. 

Manufacturing, similar with other sectors that suffered from the pandemic, deteriorated from March to August, before briefly returning to growth in September. Declines after that month showed the fragility of recovery. 

“The pandemic, and ongoing restrictions have hit manufacturers hard, impacting both demand and output, which remained historically weak,” Shreena Patel, economist at IHS Markit, said in a commentary.

As it appears, IHS Markit said lockdowns that prevented people movements still prevented factories from operating smoothly 6 months since prohibitions were slowly relaxed. Typhoons that disrupted business added to manufacturers’ woes last month. 

In contrast to typical holiday boost, companies polled also reported tepid domestic demand that gave them no reason to ramp up production. Orders abroad partly took up the slack for the fourth straight month, but fewer workers also attended to orders as “job shedding” persisted. 

Compounding the problem are “supply chain pressures” that jacked up production costs for the eighth consecutive month in December. This, in turn, were passed on to consumers through higher selling prices that dampened demand further.

“Higher input costs and softer new order inflows led firms to reduce purchasing activity in December. In turn, stocks of both raw materials and finished goods were depleted,” IHS Markit said. 

While December was indeed still a bad month for producers, IHS Markit’s Patel said there were still a bright side from the 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.