Weak demand, rainy season disrupt PH manufacturing

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THE manufacturing sector registered declines in volume and value in June, with basic metals reflecting the heftiest drop among the major sectors, the Philippine Statistic Authority (PSA) reported on Tuesday.

Persistently weak global demand and business interruptions during the rainy season were behind the poor performance of the country’s manufacturing output, the National Economic and Development Authority (NEDA) said in a separate statement.

Factory output as measured by the volume of production index (VoPI) dropped 3.6 percent year-on-year, from a 3.1-percent contraction in May. These numbers were a complete reversal from double-digit gains of 12.7 percent in June last year, the latest Monthly Integrated Survey of Selected Industries (MISSI) from the PSA showed.

Moody’s Analytics did not expect a decline, but gave an earlier forecast of 1.2-percent growth for June.


Declines were noted in 11 sectors led by basic metals, which dropped 36.7 percent. Wood and wood products, petroleum products, furniture and fixtures, footwear and wearing apparel, food manufacturing, and electrical machinery were also down, the PSA noted.

Value down 7.3%
The value of production index (VaPI) showed that manufacturing output in June lost 7.3 percent, erasing a 10.1-percent increase a year earlier.

Nine major sectors recorded double-digit losses in production values, particularly basic metals, food manufacturing, petroleum products, footwear and wearing apparel, furniture and fixtures, and wood and wood products.

Optimism remains
Despite the latest numbers, the NEDA claimed that business expectations across sectors remain optimistic.

“Household consumption is also expected to be strong, driven by a sustained inflow of remittances and election-related spending. These will then boost domestic demand and support growth in the manufacturing sector,” said Socioeconomic Planning Secretary Arsenio Balisacan.

Balisacan, who is also the NEDA director general noted that the positive outlook for the construction-related sectors is backed by brisk construction activities, driven by the growth of tourism, infrastructure-related government projects, and robust information technology and business process outsourcing.

“This will result in additional demand for offices and other facilities, housing spaces, roads and bridges. Furthermore, low inflation environment and continuous decline in oil prices are expected to keep construction costs at minimal level,” he added.

To increase the participation in global value chains and manufacturing activities, the government must pursue consistent and responsive policy initiatives for micro, small and medium enterprises, the NEDA chief pointed out.

The country should invest in cost-effective and climate-smart technology that will reduce the vulnerability of locally-produced products from the seasonal changes in weather conditions, Balisacan added.

The passage of the Philippine Competition Act and the Foreign Ships Co-Loading Act should be supported by the delivery of necessary infrastructure projects to address the bottlenecks in the logistics and transport systems, he said.

“Business procedures must be streamlined to encourage new entrants, while existing firms need to be encouraged to diversify into new product lines and market,” he added.

Utilization rates

The average capacity utilization of factories in June remains at 83.3 percent year-on-year, with half of the 20 major industries registering utilization rates of 80 percent and above.
Net sales by volume and value also fell in June. The volume of net sales index slipped by
7.1 percent while the value of net sales index dropped 10.6 percent.

NEDA said the food sub-sector maintained a double-digit, year-on-year drop of 12.5 and 12.7 percent in volume and value of production, suffering from the effects of sagging world milk prices as well as the lower imports from China and a ban in Russia.

For consumer goods, the PSA said the volume and value of net sales in furniture and fixtures grew by 61.4 and 37.6 percent.

Similarly, the year-on-year growth of tobacco volume and value of net sales climbed at 10.9 and 11.9 percent.

For intermediate goods, production and net sales of non-metallic mineral products showed a double-digit, year-on-year growth of 28.5 percent and 24.5 percent in volume and 18.7 and 14.9 percent in value.

NEDA cited an increase in demand from infrastructure-related government projects as well as the growing tourism, information technology and business process outsourcing industry that helped grow the sector.

For capital goods the collective double-digit, year-on-year growth in net sales value and volume for fabricated materials, machinery and transport equipment helped offset the steep decline in basic metals, it added.

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