Moody’s sees slower factory output growth
FACTORY OUTPUT likely remained growing in November but at a slightly slower pace than in the preceding month, Moody’s Analytics said in a recent report, blaming a storm that could have disrupted food production.
Moody’s analysts expect an 8% growth in manufacturing volume for the month, which if realized would be slower than October’s 8.4% climb though still faster than the 4.4% increase posted in November 2015.
The Philippine Statistics Authority (PSA) is set to report preliminary manufacturing and trade data on Tuesday.
Moody’s Analytics expects slower growth due to the impact of supertyphoon Lawin ( international name: Haima) that barreled through crop-rich provinces in Luzon.
“Food production will likely slow in the short term due to the negative impact that typhoon Lawin had on agriculture,” the Moody’s unit said in a market data preview sent over the weekend.
Typhoon Lawin ruined 90,035 homes and caused P3.738 billion worth damage across four regions, according to an Oct. 25 report from the National Disaster Risk Reduction and Management Council. Rice-producing provinces in northern Luzon were among the hardest hit
by the typhoon, causing damage worth P9.21 billion to rice and corn crops, according to the Department of Agriculture.
Moody’s analysts said the slowdown in food production was unlikely to have derailed prospects for sustained growth in the manufacturing sector.
“Despite this, the overall outlook for Philippine manufacturing remains positive,” the report read, noting that “[ h]igher external demand is boosting electronics production, while rapid growth in domestic demand will support production as a whole.”
Food manufacturing saw the fourth-biggest increase in October last year, rising 14.3% from a year ago that was double the 7.3% climb logged in September.
Petroleum products saw the biggest increase in production at 37%, followed by machinery except electrical items and transport equipment, according to preliminary PSA data.
Capacity utilization — or the extent by which industry resources are used in the production of goods — averaged 83.7% in October, with 11 out of 20 major industries operating above the 80% level.
The national government expects a resurgence in manufacturing, with Trade secretary Ramon M. Lopez projecting an 8-10% annual increase until 2022.
The latest Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI) showed that local producers continued to expand their businesses with a 55.7 PMI reading in December, even as this marked a three- month slowdown that could signal a “loss of growth momentum”. A reading above 50 reflects improvement in business conditions, while a score below that suggests deterioration. Bernard Aw, economist at IHS Markit that conducts the survey for Nikkei, Inc., said robust client demand drove the sustained growth, but flagged concerns on traffic congestion and customs bottlenecks that posed risks to production.