Factories close to stabilizing operations after disruptive lockdowns

MANILA, Philippines — Local factory operations finally came within striking distance of stabilizing in November after months of slump when businesses were shut down by lockdowns and the health crisis.

Results of a monthly survey of 400 companies showed the Philippines' purchasing managers’ index (PMI) — a measure of manufacturing output — rose to 49.9 last month from 48.5 in October, IHS Markit, a British information provider, said in a report released Tuesday.

Last month’s reading is only a tad lower from the benchmark 50 which separates contraction and growth. PMI had been below that mark since March when movement restrictions started to be enforced, and IHS said the latest data reflected an improvement is finally underway.

“The Filipino manufacturing sector showed promising signs of renewed recovery momentum in November as the headline PMI figure neared stabilisation,” economist Shreeya Patel said in the commentary.

What facilitated the better numbers was a fractional rise in manufacturing output, a first since June when the government started relaxing prohibitions. That rise, however, was still tempered persistent job cuts in the sector, although reductions happened at their slowest pace in 9 months last month.

Across output segments, companies polled said new orders continued to contract in November, although the drop moderated compared to the preceding month mainly due to “notable” rise in demand from foreign clients as other countries further ease border restrictions. 

Domestically, reopening of businesses prompted factories to replenish inventories to meet improving demand ahead of the typically strong holiday season. Port congestions and traffic delays however disrupted supply that pushed up raw material prices, the cost of which was passed on to consumers.

“Nevertheless, the path to recovery may not be smooth,” Patel said. 

“The health of the sector rests on the number of COVID-19 cases and the impact the virus has on the global economy. Whilst vaccine developments look promising, it is still unclear when restrictions will come to a complete end,” she explained.

Despite better operations compared to previous month, factories, nonetheless, are still fighting to stay afloat. IHS Markit said some firms still lowered their prices despite rising production costs to improve sales in a bid to attract customers and boost sales.

Companies are also keeping a positive outlook for the next 12 months “following hopes of improved demand and the passing of the pandemic.”