PHL manufacturing posts record low in March -IHS Markit

The Philippine Purchasing Managers' Index (PMI) fell sharply to record its weakest performance so far in the IHS Markit monthly survey, dragged by the factory shutdowns brought about by the spread of the coronavirus disease 2019 (COVID-19).

The IHS Markit Philippines PMI fell to 39.7 in March, down from 52.3 in February and 51.5 in March 2019.

The PMI is a composite indicator of the manufacturing sector’s performance, with 50.0 as the threshold. A reading above 50 indicates growth and below 50 is a contraction.

"The latest figure was the lowest in the series history, having dropped below the 50.0 neutral mark for the first time, and signaled a marked deterioration in operating conditions," IHS Markit said in an emailed statement.

In an explanatory note, IHS Markit attributed the slowdown to the shutdown of factories during the enhanced community quarantine (ECQ) placed over Luzon.

"The COVID-19 pandemic took its toll on goods production in the Philippines in March, as the enforced lockdown of Luzon island led many manufacturers to halt operations until restrictions are lifted," David Owen, economist at IHS Markit, said in an explanatory note.

From 12 a.m. on March 17, the entire Luzon was placed on enhanced community quarantine until April 13, 2020, restricting travel within the region in efforts to contain the spread of COVID-19.

"These shutdowns led to sharp declines across the sector, with output, new orders, employment and stocks of purchases all falling at record paces," said Owen.

"Firms that remained open meanwhile saw a large delay in supplier delivery times, restricting their ability to operate at full capacity."

According to IHS Markit, customer demand also fell sharply since February, given the drop in new orders. Restrictions on travel and weaker activity also led clients to curb orders.

"In addition, manufacturing sales were stymied in March, with clients having to massively reduce order books amid much weaker consumer demand. Exports were similarly down as surrounding countries enforced their own lockdowns whilst curtailing foreign orders," Owen said.

"Unsurprisingly, businesses were much less positive regarding the 12-month future period. With no one knowing the full timeline of the pandemic, the extent of the economic impact remains largely unknown," he explained.

IHS Markit noted, however, that hopes of a swift return to normal operations and a rebound in new contracts helped to partly offset the downbeat predictions.

The government figures on manufacturing for March, or the results of the Monthly Integrated Survey of Selected Industries (MISSI), will be released on May 05. --KBK, GMA News