IHS MARKIT said its Philippine purchasing managers’ index (PMI) was 52.3 in February, the highest level in Southeast Asia, and outperforming other economies whose supply chains were disrupted more severely by the coronavirus outbreak.
IHS Markit, an economic data provider, said Tuesday that the ASEAN region’s purchasing managers’ index rose to 50.2 last month from a 49.8 reading in January, its first gain in nine months which it described as “only fractional” due to declines in production and falling employment.
PMIs are considered leading indicators of future manufacturing activity because materials for processing must be ordered in advance. PMIs are typically organized around a scale of 50 points, with readings above 50 signalling expansion and those under 50, contraction.
The Philippine PMI performance in February, up from 52.1 in January, represents “the joint-fastest improvement in operating conditions since December 2018.” Previously, Myanmar had been the region’s top performer since February 2019. Myanmar posted a 49.8 reading last month from 52.7 a month earlier.
“At 49.8, the latest reading ended a survey record 15-month period of continuous improvement,” IHS Markit said.
Indonesia posted a “modest uptick” of 51.9 last month, expanding for the “first (time) in eight months.” Thailand posted a second consecutive contraction at 49.5 , while Vietnam’s 49 “signalled the first deterioration in the health of the sector since late 2015, amid reports” of disruptions stemming from the outbreak of coronavirus, formally known as Covid-19.
Malaysia’s PMI reading was 48.5 while Singapore’s downturn continued in February to 45.8, the lowest level in four months.
“(The ASEAN PMI reading improved as) new orders increased at the quickest rate since May last year, but only mildly. Falls in output and employment weighed on the headline figure, however, as production declined for the first time since last November and workforce numbers fell at the quickest rate for three months,” IHS Markit said.
It flagged the disruptions in supply chains caused by the Covid-19 outbreak, reflected in reduced buying activity by businesses and declining inventories.
In February, pre-production inventories marked their largest fall in four months while stocks of finished goods declined for the first time since August.
“The lack of output growth so far this year, coupled with renewed supply chain pressures, adds to concerns over whether the health of the sector can improve further,” Lewis Cooper, economist at IHS Markit, was quoted as saying.
“The next month’s data will provide a further indication of the effect of the coronavirus outbreak on ASEAN goods producers,” Mr. Cooper added.
Firms reported that costs continued to increase due to higher inflation, adding that these costs were not passed on to clients since selling prices remained broadly stagnant.
“Firms remained, on average, positive that output would increase over the coming year, but overall optimism slipped to a four-month low,” the report said.
Asked to comment, Security Bank Corp. Chief Economist Robert Dan J. Roces said February’s reading indicates that the country’s manufacturing sector demonstrated ”resilience… weather(ing) challenges” such as the US-China trade war last year, the eruption of Taal Volcano… and currently, the ongoing Covid-19 outbreak that continues to disrupt global supply chains and slow economic activity.
“However, the sector is not immune to economic headwinds, most especially from regional supply chain disruptions and indeed it will mirror the impact to manufacturing in the region; but we do expect it to still perform better relative to peers,” Mr. Roces added in an e-mail.
ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said the PMI report indicates some “interesting trends” including “idle supply chains in China” due to closed factories, while the Philippines and Indonesia posted “surprising improvements” in their readings.
“One common factor between the two is that they have relatively lower exposure to China’s global supply chain (as well as the other) characteristic shared between the Philippines and Indonesia, that food manufacturing comprises the bulk of activity,” Mr. Mapa said.
“We are hoping that this means that food production in both the Philippines and Indonesia remains robust, which could ensure stable supply for domestic consumption and lower food prices for Filipinos and Indonesians,” he added.
However, as the outbreak continues to persist and weigh on China’s production, he warned that the PMI indices for these two countries could be dragged lower. — Beatrice M. Laforga