MANILA, Philippines — Local factories returned to expansion mode in the first month of the year, with manufacturers ramping up production as demand slowly get back to pre-pandemic levels.
Results of a monthly survey of 400 companies showed the Philippines’ purchasing managers’ index — a measure of manufacturing output — rose to 52.5 in January, IHS Markit, a British information provider, said in a report on Monday.
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The latest reading was higher than 49.2 recorded in the December and was the highest in 25 months, according to IHS. It also marked the first time in 3 months that the figure settled above 50 which separates growth. IHS said output finally rose “modestly” despite some existing movement curbs.
“Production volumes rose solidly, while renewed growth in new orders indicated an overall improvement in demand conditions,” Shreeya Patel, economist at IHS Markit, said in a commentary.
“An increase in purchasing activity and stocked inventories was also a positive sign that manufacturing companies expect demand to grow over the coming months,” Patel added.
Breaking down the report, companies polled said new orders “rose solidly” at their fastest rate since July 2019. Unlike the previous months, improving domestic demand prompted factories to churn out in January, while that in overseas, which held up for most of 2020, contracted with export destinations retightening their lockdowns due to the coronavirus variant.
Manufacturing, similar with other economic sectors that suffered from the pandemic’s devastating effects in demand, deteriorated from March to August last year shortly after lockdowns were enforced. Some pick-up was noticed in September, although declines in months after that showed the fragility of recovery even during the holidays when production is typically buoyant.
The threat of falling down back in the red remains after last month, Patel said, pointing to manufacturers’ continued shedding of workers to save overhead costs. Although the magnitude of layoffs hit its softest level in 11 months, fewer workers mean companies are still not expecting the recent rebound to be sustainable that would warrant keeping a tighter workforce.
At the same time, port congestions and some form of existing movement restrictions still in effect continued to hamper delivery of new orders and raw materials. Rising input costs, which notched a 9-month high in January, also meant supply has tightened because of fourth-quarter typhoons, threatening further expansion.
Overall, factories are trying to be optimistic for the rest of the year, but the health crisis and lingering lockdowns are weighing on sentiment. “Business are hoping for a successful and swift vaccine roll-out plan, which is scheduled to begin during the first quarter,” Patel said.
“Until then, restrictions are likely to stay in place as policy makers seek to contain virus case numbers,” she said.