Manufacturing growth likely slows in April

MANILA, Philippines - Manufacturing likely grew at a slower pace in April, the month being a “lean” one for the sector, according to the Purchasing Managers’ Index (PMI) of the Asian Centre for Enterprise Development (Ascend).

The PMI manufacturing index in April showed a slower growth with an index of 55.71, down 2.42 index points from March.

“The month of April was described as a lean month hence a decrease in manufacturing is expected,” the research note said.

An index above 50 implies economic expansion and an index below 60 implies a contraction.

Despite the slowdown, the April index is the second highest for the year, next to March.

PMI Manufacturing has been above the growth threshold from May 2011 to April 2012.

Three of the five indices: new orders, production and inventories registered decreases compared to the previous month. The employment and supplier deliveries indices, however, indicated an increase from last month.

Compared to April last year, only the index of supply deliveries registered decreases.

Of the 12 manufacturing sectors surveyed, only the sectors of publishing, printing, and production of recorded media registered an index below the growth sector.

Of the 326 purchasing/supply managers asked about the performance of their company in April 2012 as compared to the previous month, 59 percent say conditions remained the same, 28 percent said conditions improved, 13 said their companies experienced a decline in their business activities.

The PMI is a so-called “nowcasting” tool designed to estimate economic trends and complement standard economic indicators such as gross domestic product (GDP) that require three to six months to finalize.

Some 32 countries worldwide use the PMI as an economic indicator based on movements in new orders, production, employment, supplier deliveries, and inventories.

Retail and wholesale activities also slowed down in April as shown by the decrease in the PMI Retail/Wholesale (PMI RW) index to 55.80 in April by 4.55 index points from last month.

“This index is indicative of a slack in economic activities in the retail and wholesale sectors,” the research note said.

Compared to last year, the PMI for April 2012 registered increases in employment and sales revenues. However, the indices for purchases, supplier deliveries and inventories decreased from the same month last year.

Compared to the previous month of March, all indices registered a decrease in April. Sales Revenues registered the largest decrease, down 9.48 index points from last month.

Out of 97 purchasing/supply managers asked about the performance of their company in April 2012 as compared to the previous month, 59 percent said conditions remained the same, 31 percent said conditions improved, 10 percent said their companies experienced a decline in their business activities.

The PMI RW has been above the expansion threshold since the start of 2011. 

“The index this month is down, a trend that merely signals a breathing spell in preparation for the demand upswing before the start of the school opening and the fiesta month of May,” the research note said.

The services index, meanwhile, went down 1.19 index points from 64.72 last month to 63.5 in April, indicating slower expansion.

The index however remains at a level significantly higher than the growth threshold of 50.

Of the five indices, only employment registered an increase of 3.2 index points from last month.

The research noted said the index for outstanding business registered the largest decrease this month but did not specify the rate of decrease. The indices of new orders, business activity and average operating costs went down 1.4, 2.3 and 1.8 index-points from March respectively.

The index for price charge went down slightly from 62.9 in March to 62.3 in April.

Of the102 purchasing/supply chain managers of top services companies asked about their companies’ performance in April 2012 as compared to the previous month, 40 percent said they experienced expansion, 48 percent said conditions remained the same twelve percent said their companies experienced contraction.

The PMI Services index has been above the economic threshold for 12 months indicating consistent growth.