Philippine factory output slips to 15-month low in August

Philippine manufacturing output fell to a 15-month low in August as the strictest community quarantine was reimposed due to the spread of the COVID-19 delta variant, results of the monthly survey conducted by IHS Markit show.

The IHS Markit Philippines Manufacturing PMI slipped to 46.4 in August, falling below the 50.0 threshold that separates contraction and expansion. This compares with 50.4 in July, and 47.3 in August 2020.

Also, the latest reading is the weakest in 15 months since May 2020’s 40.1.

“With the announcement of tightening ECQ (enhanced community quarantine) measures in early August, the latest contraction in operating conditions in the Philippines manufacturing sector came as no surprise,” Shreeya Patel, economist at IHS Markit, said in an accompanying commentary.

“Factories and their clients in the Metro Manila area once again paused their production lines in a bid to curb the spread of the new delta variant,” she added.

Metro Manila was placed under the ECQ from August 6 to August 20, amid the surge in COVID-19 cases given the spread of the delta variant. This was followed by the modified ECQ (MECQ) set to last until September 7, 2021

Earlier, the National Economic and Development Authority (NEDA) estimated weekly production output losses of P150 billion due to the quarantine restrictions.

IHS Markit data showed that all five of the PMI components worsened, with production volumes down for the fifth straight month, and customer demand falling at one of the quickest rates in the series history.

Firms also curbed orders due to business closures, while exports fell at the quickest rate in 13 months. Purchasing activity slipped on lower output requirements.

“On a brighter note, firms’ expectations towards the outlook remained optimistic owing to hopes that the latest downturn is only temporary,” Patel said.

“Looking at price, easing input costs suggests that the sharp price pressures seen since the start of the year are starting to ease,” she added.

Moving forward, firms are closely watching the vaccination rollout in the country. The Philippines has so far received 48.885 million doses as of August 25, of which 33.099 million have been administered as of August 29. Some 13.784 individuals have already received two jabs, while 19.314 million have received only one.

“Firms will hope shocks to the supply of vaccines are brought under control to prevent this being pushed back again,” Patel said. —LBG, GMA News