Following a growth deceleration in January this year, the country’s manufacturing economy records another low slow progress score in February, the second month of the new tax reform law.
IHS Markit announced in its report Thursday that Nikkei Philippines Manufacturing Index (PMI) score trickled from January’s 51.7 to 50.8 for February, according to Inquirer.net.
The same article also noted that the current PMI score is the country’s second lowest since the survey’s commencement in January 2016.
Still, the score reflects an increase as it falls in the 50 and above threshold set to indicate progress.
IHS Markit principal economist Bernard Aw stated the score set the manufacturing sector “on course for the weakest quarter in the survey history”, saying that it “lost further momentum in February” according to Inquirer.net.
February marks the second month of the Tax Reform for Acceleration (TRAIN) law’s implementation in the country, continuing the notable changes brought about by the mandate, such as cuts on personal income taxes while imposing higher taxes on certain goods.
How is it affecting the country’s manufacturing economy?
Aw said that the additional levies brought about by TRAIN “continued to have an adverse impact on demand”, adding that export sales dwindled as well.
There has also been a noted decrease in “staffing numbers” due to “the persistent lack of capacity pressure, as indicated by declining backlogs”.
“The tighter squeeze on profit margins” due to rapid “inflationary pressures”, Aw described, is an area of concern, that led to “reports of layoffs as part of efforts to reduce costs”.
Heightened costs were attributed by firms to “higher excise taxes and increased commodity prices”, he said, while the effect “higher import costs” were intensified by “a weaker peso”, as stated in Inquirer.net’s report.