Volume growth decelerates while value contracts
Philippine manufacturing output in terms of volume grew at a slower pace in January, while value dropped due to a double-digit contraction in the production of petroleum products, the latest data from the Philippine Statistics Authority (PSA) showed on Tuesday.
The results were an unexpected reversal of earlier forecasts by analysts for a moderate expansion of manufacturing in January.
In a statement, the National Economic and Development Authority (NEDA) said the lower manufacturing output in January was attributable to the decline in demand after the holiday season.
The Volume of Production index (VoPI) registered its slowest growth since April 2014 as it rose by only 3.3 percent in January from 4.4 percent in the same month last year, based on the Monthly Integrated Survey of Selected Industries (MISSI).
The January VoPI also marks a slowdown from the 6.7 percent overall increase posted in the previous month, the survey said.
Fourteen major sectors posted “significant increases,” the PSA report said. These were printing, leather products, basic metals, beverages, textiles, tobacco products, transport equipment, non-metallic mineral products, wood and wood products, paper and paper products, and machinery except electrical.
Value growth contracts
The Value of Production Index (VaPI), on the other hand, recorded its steepest decline since May 2013.
Manufacturing output in terms of VaPI decreased by 1.8 percent in January from 3.3 percent gain in the same month last year as well as the 3.3 percent expansion in December 2014.
“This was due to the decreases in production value observed in seven major sectors, outpacing the increases reported by 13 major sectors,” the PSA said.
Petroleum products contributed significantly to the decrease at negative 35.4 percent, followed by food manufacturing, chemical products, footwear and wearing apparel, miscellaneous manufactures, furniture and fixtures, and fabricated metal products.
“The overall production indices of the manufacturing sector were dragged down by lower food production due to post-holiday tempering of consumer demand, and due to firms keeping their production at manageable levels during the start of the year,” said Economic Planning Secretary Arsenio Balisacan.
Indicators point to higher demand
Balisacan, who is also NEDA director-general, said indicators point to higher growth of the sector in 2015 despite the low output growth in January.
However, he said the manufacturing sector needs to enhance its absorptive capacity, and constraints faced by the sector must be addressed for it to be able to meet growing demand.
The NEDA chief underscored the need to fast-track infrastructure development to address logistical bottlenecks.
“Constraints remain on airport, cargo, road network and mass transport. Despite the positive effects of implemented decongestion efforts on ports, more needs to be done to accommodate stronger demand,” he said.
Balisacan added that power also needs to be managed well to meet higher demand from the manufacturing sector, particularly those involved in manufacturing of textiles, plastics, non-metallic mineral products and some electronic products.
“Short-run measures are now being carefully weighed in the legislative branch. The completion of committed power projects will ease concern in the medium term. Long-run energy security measures should, as well, be in place, such as encouraging more investments in a mix of energy sources, among others,” said Balisacan.
According to the MISSI report, production capacity utilization in January for all forms of manufacturing stood at an average 83.2 percent, with 13 of the 20 major industries registering capacity utilization rates of 80 percent or more.
The Volume of Net Sales Index and Value of Net Sales Index, two additional indicators compiled by the MISSI, both expanded year-on-year in January.
The net sales volume in January increased 8.1 percent, higher than the 5 percent pace recorded last year. However, net sales value grew at a slower pace of 2.8 percent compared to the 3.9 percent achieved in the year-earlier period.
Both indicators, however, showed improvement from December, when the Volume of Net Sales Index contracted by 0.1 percent, and the Value of Net Sales Index eased by 3.3 percent.