2019News

Port congestion dents manufacturing growth

By Bianca Cuaresma, April 2 2019; Business Mirror

https://businessmirror.com.ph/2019/04/02/port-congestion-dents-manufacturing-growth/

Image Credit to Business Mirror

THE earlier mood of optimism in the country’s manufacturing sector turned sour at the end of the first quarter of 2019, as the problem of port congestion dragged down production during the period.

Reports from IHS Markit on Monday showed that the Philippine manufacturing sector’s purchasing managers index (PMI) fell to 51.5 in March from 51.9 in February.

The PMI is a composite index meant to gauge the health of the country’s manufacturing sector. It is calculated as a weighted average of five individual subcomponents. Readings above the 50 threshold signal a growth in the manufacturing sector while readings below 50 show deterioration in the industry.

The latest reading was the lowest for seven months, indicating weaker growth of Filipino manufacturers.

IHS Markit economist David Owen flagged the problem of port congestion in Manila as one of the leading problems behind the slump in the month’s manufacturing sector performance.

In particular, while many businesses saw volumes of work increase from February, others reported decreased production due to falling sales and reduced supply of raw materials.

Also, IHS Markit said firms saw a fractional decline in new export orders. “Anecdotal evidence suggested that weaker overseas demand and administration issues affected sales,” the research note said.

The report also said companies saw further delays to delivery times in March. Lead times increased marginally, mostly due to worsening port congestion in Manila.

“Slowing output growth and a comparably modest rise in new business hampered manufacturers in March, with the PMI sliding for the fourth month running,” Owen said.

“Port congestion at Manila continues to increase lead times and reduce raw material supply, and will likely harm exports if the problem is not contained,” he added.

The Philippines’s weak performance in March caused it to drop in the rankings of manufacturing sector performance in the region during the month.

IHS Markit’s ranking of seven Southeast Asian economies showed the Philippines at third overall during the month, following Myanmar’s 52.4 and Vietnam’s 51.9 PMI.

Following the Philippines is Indonesia’s PMI at 51.2 and Thailand’s at 50.3.

Singapore and Malaysia were in the contraction phase anew at 47.9 and 47.2 respectively.

On average, the region’s PMI rose from 49.6 in February to 50.3 in March. The rate of growth ticked up to a three-month high, as five of the seven monitored countries recorded increased production.

“[The] Philippines dropped to third place in the league table, as operating conditions improved at a slower pace and supply chains were constrained by port delays,” the report read.

Also, IHS Markit said business sentiment about the future dropped to a record low at the end of the first quarter, as more panelists expressed doubts over output growth this year.

“Overall for the first quarter, the PMI points to weaker growth in manufacturing production compared to the end of 2018, with employment trends also remaining subdued,” Owen said.

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