Factory July output drops on weak global demand

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THE manufacturing sector posted declines in volume and value in July, with basic metals, and wood and wood products reflecting the largest fall among the major sectors, the Philippine Statistic Authority (PSA) reported on Thursday.

The National Economic and Development Authority (NEDA) traced the poor performance of manufacturing sector to the continuing weak global demand.

Factory output as measured by the volume of production index (VoPI) dropped 0.5 percent year-on-year, and compares with the revised 1.6-percent contraction in June.

These numbers were a complete reversal from a 7.6 percent rise in July last year, the latest Monthly Integrated Survey of Selected Industries (MISSI) showed.


It also fell below the 3.3-percent contraction Moody’s Analytics expected for July.

Declines were noted in six sectors led by basic metals, which dropped 31.4 percent. These included wood and wood products, food manufacturing, beverages, machinery except electrical, and furniture and fixtures, the PSA noted.

VaPI down 6.9%
The value of production index (VaPI) showed that factory output lost 6.9 percent in July, erasing a 6-percent increase a year earlier.

Eight major sectors recorded losses in terms of VaPI, particularly wood and wood products, basic metals, food manufacturing, petroleum products, electrical machinery, machinery except electrical, beverages, and furniture and fixtures.

Diversification
The NEDA said the country must diversify and ensure the quality of export-oriented products, noting such moves are keys to surviving the weak global demand and the stiff competition in the international market.

Economic Planning Secretary Arsenio Balisacan said providing adequate and efficient infrastructure is a must to be able to provide reliable and cost-effective logistics and transport requirements for manufactured goods and other related services.

“Given the weak global demand, it is important to continue to stimulate domestic demand to fuel the manufacturing industry. In the short- to medium-term, this can originate from the demand for housing and infrastructure, Balisacan, who is also the NEDA director-general, said in a separate statement.

It is important to ensure that the government’s infrastructure program is implemented on time, he said.

Private investments in housing should also be encouraged, specifically through regulatory reform and better access to housing finance, he added.

In terms of transport logistics, Balisacan noted a need to implement coordinated, effective and innovative traffic schemes to maximize the capacity of existing infrastructure and road networks.

This is needed, especially in the short-run, to support the growing passenger car sales and brisk-economic activities in manufacturing sub-sectors while major improvements in infrastructure and transport services are being worked out, he said

“Alleviating the traffic and transport woes of the country will not only benefit the people but the economy as well by attracting foreign and domestic investments for the manufacturing and services sectors,” he added.

“We remain optimistic about the manufacturing sector for the rest of the year as the incoming holiday season will boost both production and sales. The persistently low oil prices will also aid the industry in the coming months,” Balisacan said.

Utilization rate
The average capacity utilization of factories remains at 83.3 percent year-on-year in July, with more than half of the 20 major industries registering utilization rates of 80 percent and above.

But net sales by volume and value also fell in July. The volume of net sales index slipped by 0.3 percent while the value of net sales index down 6.7 percent.

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