Manufacturing activities continue to hobble amid weak purchasing power

• Services expand in January though at a lesser pace than a month ago 

The Purchasing Managers Index (PMI) for January showed a steep contraction in manufacturing activities from a month ago, while services activities continued to expand despite losing some steam, reflecting the troubles faced by the broader economy.

The manufacturing PMI reported 40.8 index points in January, slipping from 44.8 index points recorded a month ago as activities came down from the seasonal demand in December 2022.

Respondents to the PMI survey have continued to cite the deteriorating purchasing power of people, particularly in the local market for even food and beverages, while exporters, particularly those in the textiles and garment sectors, are seeing some demand cooling from their key markets in North America and Europe.

This was amply seen from the earnings reports coming from the textile and apparel makers as they were contending with excess capacity by the end of the final three months of last year due to slowdown in consumer demand in major foreign markets.

“Many respondents involved in the manufacture of food and beverages mentioned they experienced a notable decline in demand mainly due to the deteriorating purchasing power of the consumers, in addition to the seasonal drop in demand following the December festival season,” the Central Bank said in the January PMI statement. 

“Export-oriented manufacturers such as those in the textiles & wearing apparel sector observed that the export demand remained subdued amidst a slowdown in major export destination economies, forcing them to run factories significantly below the full capacity,” it added. These caused employment conditions to ease while many manufacturers had also reduced their material purchases intentionally with the build-up of inventory.  Meanwhile, the services PMI reported 50.2 index points in January slightly down from 51.6 index points in December though still recording an expansion.  The January services PMI was underpinned by the improvements in new businesses, business activities and expectations for activity, although the survey respondents expressed anguish about the reduced purchasing power coming along with the new tax structure, and the electricity tariff hike, which they believe would be detrimental for their future activity.  In January, sectors such as financial, education and telecommunication showed improvements while the recovery in tourism trade had lifted activities related to other personal activities and accommodation and food and beverages.  “However, business activities related to the wholesale and retail trade sub-sector continued to deteriorate amid off season and reduced purchasing power of consumers,” the statement said. “Furthermore, transportation sub-sector also declined due to decrease in freight volumes, particularly related to textiles & wearing apparel sector,” it added.  The employment in the sector continued to decline due to the combined effect of resignations, migrations and retirements occurred during the month.