Philippine factory growth second-best in ASEAN

THE PHILIPPINES’ manufacturing activity improved last month but tied with Vietnam to take the second rank below Myanmar, according to an IHS Markit survey conducted for Nikkei.
The country logged a 52.7 Purchasing Managers Index (PMI) in April, a “solid increase” from the 51.5 recorded in March, to tie with Vietnam.
It was also above the 51 PMI average of seven select Association of Southeast Asian Nations (ASEAN) member-states, which was the highest level in a year, from 50.1 in the previous month.
Myanmar however had the highest reading that month at a “sharp increase” to 55.5. Both Indonesia and Singapore meanwhile saw a “modest increase” to 51.6 and 51.1 to rank third and fourth, respectively.
This was followed by Thailand’s 49.5 reading, a “marginal” decrease from the previous month, and Malaysia’s “modest decrease” to 48.6.

A PMI reading above 50 suggests improvement in business conditions compared to the previous month, while a score below that signals deterioration.
The manufacturing PMI is composed of five sub-indices, with new orders weighing 30%, followed by output (25%), employment (20%), suppliers’ delivery times (15%) and stocks of purchases (10%).
“Faster rises in new orders and output, and a renewed increase in employment, all boosted the headline index. However, inventories of inputs continued to decline,” the report read.
It said both Vietnam and the Philippines saw “faster improvements in operating conditions.”
However, it noted that Philippine manufacturers faced higher costs, which led them to raise their selling prices “to help protect profit margins, with the country registering the steepest rate of charge inflation.
The economy saw a 4.5% headline inflation rate last month, the fastest pace in over five years, Philippine Statistics Authority data showed, with the four-month average at 4.1%.
Nikkei’s Philippine PMI report for April released last week showed manufacturers paid higher prices for fuel, industrial metal, sugar, and paper due to a weaker peso-dollar exchange rate and the new excise taxes introduced in January.
Republic Act No. 10963 — or the Tax Reform for Acceleration and Inclusion (TRAIN) — reduced personal income taxes and estate and donors tax rates, but removed some value-added tax exemptions; hiked excise tax rates for automobiles, minerals, tobacco and fuel; as well as imposed new excise levies on sugar-sweetened beverages, among others.
IHS Markit Principal Economist Bernard Aw said although faster rises in output and new orders boosted the ASEAN manufacturing sector, “demand needs to grow at a faster rate before stronger growth can take root.”
“First, sales are not increasing fast enough to test the capacity of manufacturers across the region. Backlogs of work continued to fall, which weighed on hiring, suggesting that future job creation may be limited. Second, firms remained cautious about inventory management despite the pick-up in orders. Inventories of both inputs and finished goods continued to be depleted. Third, while business confidence remained positive, optimism was among the lowest in the survey history,” he said.
The Philippine report however noted that factory activity saw faster rises in both output and new orders in the local and foreign front, and that business optimism “remained high.” — E.J.C. Tubayan