MANUFACTURING output in July likely grew by 8 percent from a year ago driven by domestic demand although at a slower pace than the 8.5 percent growth seen in June, the economic research arm of Moody’s Investors Service said.
In its latest weekly outlook, Moody’s Analytics said strong domestic demand and rapid economic growth would keep production increasing rapidly for the rest of 2016.
In July last year, manufacturing output inched up just 0.1 percent year-on-year.
The Philippine Statistics Authority (PSA) is due to release the July output data this Friday, September 9.
“Thriving private consumption and investment in the archipelago have been offsetting the weakness in external demand for Philippine goods,” it said.
Moody’s Analytics noted that the main drag on production in recent months has been food production as the severe El Niño climate pattern impacted adversely on yields.
Nevertheless, it pointed out that these effects would diminish in the coming months.
In June this year, manufacturing growth as measured by the Volume of Production index (VOPi) accelerated to 8.5 percent compared with a 1.7 percent drop in June 2015 and 7.3 percent increase in May 2016.
Manufacturing growth in June was traced largely to a recovery in the production of construction-related manufactures, particularly in basic metals.
The National Economic and Development Authority (NEDA) said that this signifies an improvement from the subdued growth in 2015 and reflects the sector’s strong production growth since the beginning of the year.
NEDA stressed that strong manufacturing growth indicates a resilient domestic economy supported by stable macroeconomic policies.
However, it cautioned that industrial output might weaken in the third quarter due to seasonal slack in demand caused by interruption of business activities during the rainy season, as well as lower consumer demand and expectations of higher oil prices.
NEDA cited the importance of complementary initiatives to enhance agricultural productivity and strengthen linkages across all production sectors to fast-track rural development necessary in achieving genuinely inclusive growth.
Providing adequate and reliable infrastructure must be accelerated, alongside a review of bureaucratic and regulatory procedures to ensure that business-related operations, processes, and laws are appropriate for the current market conditions and societal needs, it said.