Factory production posts 'partial' rebound in June

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Metro Manila (CNN Philippines, July 1) — Manufacturing activity bounced back in June after two straight months of decline, a survey by IHS Markit published on Thursday revealed.

The IHS Markit Philippines Manufacturing Purchasing Managers’ Index (PMI) logged a value of 50.8 during the month, up from 49.9 in May. The recent figure rests above the 50.0 neutral value separating expansion from contraction.

“Declines across output, new orders and employment eased while exports rose sharply during the month,” said IHS Markit economist Shreeya Patel of the “partial” rebound in the sector.

The United Kingdom-based information provider noted milder declines in output, new orders, and employment according to Filipino manufacturers.

However, the company likewise flagged how continuing lockdown measures led to a “marginal” uptick as these restrictions also caused some delays in the supply of production inputs.

The national government placed the largest number of areas under modified enhanced community quarantine (MECQ) beginning mid-June in a bid to stomp the surge in coronavirus infections. Nine cities and 12 provinces were under the second strictest quarantine classification until the end of June. 

Survey participants likewise observed worse vendor performance due to these restrictions along with congestion in ports. The decline in production levels was also linked to such quarantine rules along with subdued demand, IHS Markit said.

Factory owners likewise flagged higher input costs during the month, caused primarily by higher transport and raw material costs. With this, they passed on the burden to consumers by hiking selling prices, added the firm.

“With declines in output and new orders persisting in June, manufacturers remained cautious about adding to their staffing,” read IHS Markit’s release. Survey partakers observed a decline in workforce figures beginning March last year, with cost saving measures and voluntary resignations the main drivers of dwindling numbers.

Given the “more severe lengthening” of suppliers’ delivery time, firms expanded pre-production inventories further, the survey found.

Factory owners also kept their optimism regarding overall prospects for higher production levels in the 12 months ahead, found IHS Markit. Hopes of greater demand often fuelled stronger expectations, it added, with sentiment hitting a three-month high.

"Nevertheless, with the vaccination program still in the early stages, controlling the spread of the pandemic remains principal to preventing another series of tightening restrictions,” explained Patel.

“Firms in the meantime will hope issues surrounding the supply of materials are resolved,” she added.