EconomyEditor's PickPHL factory output continues 12-month losing streak

April 8, 2021
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THE COUNTRY’S factory output declined for a 12th straight month in February, and posted its steepest fall in five months, the government reported on Thursday.

Preliminary results of the Philippine Statistics Authority’s (PSA) Monthly Integrated Survey of Selected Industries for February showed factory output, as measured by the Volume of Production Index (VoPI), plunged by 43.6% year on year in February. This was faster than the revised 12% drop in January, and a reversal of the 0.4% growth a year earlier.

The February decline marked the steepest in five months or since the 56.7% year-on-year slump seen in September 2020.

The index has been on steady a decline since March last year, around the time when strict lockdown restrictions were implemented to contain the spread of the coronavirus disease 2019 (COVID-19).

The February result brought the slump in the first two months of the year to average 27.8% compared with the 1.4% dip in the same period last year.

The PSA noted 19 out of 22 industry divisions saw a drop in February. Of these, 14 posted double-digit annual declines led by the manufacture of coke and refined petroleum products (-85.4%); machinery and equipment, except electrical (-48.5%); textiles (-32.6%); and furniture (-30.3%).

Capacity utilization — the extent to which industry resources are used in producing goods — averaged 53.8% in February, down from 56.7% in January. This was the lowest since April 2020 when it recorded an average capacity utilization rate of 46.1%.

Of the 22 sectors, 15 averaged a capacity utilization rate of at least 50% in February.

In comparison, the IHS Markit Philippines Manufacturing Purchasing Managers’ Index (PMI), which uses a different set of parameters, posted a 52.2 reading in March, above the neutral 50 mark which separates expansion from contraction. However, this was down from the 52.5 figure recorded in February.

“The downtrend in manufacturing mirrors the weakness noted in our export figures also released where we saw outbound shipments other than semiconductors fell 5.5%. The most recent PMI report also indicated fading demand for our export products,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail.

The economist also attributed the February turnout to the ongoing lockdown that continued to weigh on manufacturing activity.

The government has imposed lockdown restrictions nationwide since March of last year to curb the spread of COVID-19. Currently, Metro Manila and the provinces of Bulacan, Cavite, Laguna, and Rizal were placed under “extended community quarantine” — the country’s strictest form of lockdown until April 11.

Philippine Exporters Confederation, Inc. (Philexport) President Sergio R. Ortiz-Luis, Jr. expects manufacturing production in the coming months to continue to shrink by double-digits, albeit to a lesser degree compared with the February result due to base effects, he said in a phone interview.

A look at the PSA’s national accounts shows manufacturing to be among the top contributors to economic growth in the last few years. The same could be said for the revised 9.6% gross domestic product decline in 2020 wherein the sector chipped in -1.83 percentage point (ppt), only second to construction’s -2 ppt. — Jobo E. Hernandez

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