Manufacturing seen losing momentum

In Q2 due to high commodity prices

MANILA, Philippines — The manufacturing sector in the Philippines and in Southeast Asia may slow down in the second quarter due to surging commodity prices as an effect of the Russia-Ukraine war.

In a report, international think tank Pantheon Macroeconomics said that while manufacturing ended the first quarter on a soft note, such a recovery has long been in the making.

However, Pantheon chief Emerging Asia economist Miguel Chanco said further loss of steam is likely in the current quarter due to high costs in the global market.

The Philippines’ headline purchasing managers’ index (PMI) rose to 53.2 in March from the 52.8 in February. The March figure was the strongest in three years or since December 2018.

“The region’s overall performance throughout the first quarter has been impressive in spite of the asynchronous eruptions of the Omicron variant within the bloc,” Chanco said.

But he warned that a slowdown is likely in the short run, as new orders for the region fell for the first time in six months.

The PMI showed that international export orders for the Philippines declined again with the pandemic as the recurring reason, coupled with conditions in external markets.

“Equally as important, manufacturers in ASEAN are now sitting on a rapidly building pile of inventories,” Chanco said.

“Factories probably will bank more on these stocks to fulfill new orders or existing backlogs given the fast-rising cost of production in the wake of the war in Ukraine,” he said.

Likewise, the build-up in backlogs since mid-2021 continues to plateau, signaling that the end of fast catch-up growth is on the horizon.

Further, cost pressures were up in March. In the Philippines, input costs rose at the fastest pace on record.

Reflecting greater cost burdens, firms also hiked their selling prices at the fastest rate.