Factory output slightly dipped in March

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Metro Manila (CNN Philippines, April 7) — The country's factory output saw a slight decline in March but the level remained on expansionary territory, according to a recent survey of local manufacturers conducted through purchasing managers.

Data analytics firm IHS Markit estimated March manufacturing output at 52.2 points on its Philippines Manufacturing PMI index, a bit down from the 52.5 in February. However, the latest figure is still well above the PMI's 50.0 neutral value that separates expansion from contraction.

"The latest reading was indicative of a modest improvement in the health of the manufacturing sector with growth registered throughout the first quarter of 2021," the IHS Markit's report said.

Manufacturers of goods also reported a marginal increase in the volume of new orders during the month, but the rate of expansion softened compared to February, it added. Demand from overseas clients was rather tempered in light of coronavirus-induced restrictions in markets abroad.

Still, the overall growth in new work drove local manufacturers to ramp up their output as a faster speed.

"The rate of growth was moderate but was the joint-fastest since June 2019. Some firms noted efforts to stockpile finished goods amid expectations of greater demand in the months ahead," explained IHS Markit.

IHS Markit also flagged pressures in the supply chain that continued in March with lead times for inputs taking longer. Freight delays were mainly cited as the reason behind the worsening performance of vendors as the period at which deliveries are performed have lengthened "markedly."

Because of this, manufacturing companies have opted to beef up their inventory holdings to reduce possible shortages in the future due to such delays, IHS Markit said.

Local producers, the study said, pointed out heavier cost burdens they have faced during the month, owing to shortages of raw materials. They decided to partially pass on rising expenses by hiking their factory gate prices, the study observed.

While the outlook for Philippine production still rests on positive territory for the month amid hopes of stronger economic conditions, the degree of optimism had "posted below the long-run trend."

IHS Markit noted this suggests the global health crisis continues to weigh on manufacturers' expectations.