Trade remains challenging; factory output picks up

MERCHANDISE TRADE will remain a drag in the calculation of the country’s economic growth, as export receipts contracted in November 2016 while the import bill continued to increase.

Preliminary data from the Philippine Statistics Authority (PSA) showed total export sales drop 7.5% to $4.732 billion in November 2016 from the $5.118 billion recorded in the same month a year earlier. The drop was on account of the 10.6% decrease in earnings from manufactured goods to $4.136 billion.

The November turnout brought year-to-date export receipts to $51.361 billion, a 5.2% decrease from 2015’s $54.168 billion, putting the government’s 3% growth target for 2016 further out of reach.

Electronic products — which accounted for 53.8% of total export earnings — declined by 7.9% to $ 2.547 billion last year from $ 2.764 billion recorded in the same period of 2015.

“The weakness of Philippines electronics sector exports is of particular concern because the global electronics sector has shown a strong upturn during recent months,” Rajiv Biswas, Asia Pacific Chief Economist at IHS Global Insight, said in a report.

“The most recent SIA (Semiconductors Industry Association) data showed that worldwide sales of semiconductors rose by 7.4% year-on-year in November 2016, in sharp contrast to the 9.7% decline in semiconductors exports from the Philippines in November 2016,” Mr. Biswas added.

“For the first 11 months of 2016, exports of semiconductors from the Philippines contracted by 3.3% year-on-year,” he noted.

“A contributory factor to the overall weakness of exports measured in USD terms has been the depreciation of the peso against the USD during 2016.”

Union Bank of the Philippines chief economist Ruben Carlo O. Asuncion was of the same opinion, saying: “One would expect an increase in exports when the peso is getting cheaper.

“However, in this particular case, it is the opposite. This drop might be the result of lower demand from clients abroad who consume or use these exports.”

Japan remained the Philippines’ top export destination in November with a 19% market share at $ 898.83 million albeit down by 21.8% from $1.149 billion in November 2015. The US came in second with 13.9% of the total at $655.46 million, likewise 13.5% down from $758.08 million.

In contrast, increase in inbound shipments once again picked up in November, marking four straight months of growth as orders of capital goods, raw materials and consumer goods increased by double digits.

PSA data showed a total of $ 7.298 billion worth of goods was shipped into the country, up 19.7% from revised $6.094 billion recorded a year earlier.

For the year, inbound shipments grew 13.7% to $ 73.724 billion, against the government’s 10% target for 2016.

Consequently, the country’s balance of trade in goods in November registered a deficit of $ 2.566 billion, wider than the $976.87-million gap a year ago.

November’s trade deficit is the second-worst on record since the $2.638 billion recorded in January 2016.

“The surge in trade transactions with East Asia and the ASEAN ( Association of South East Asian Nations) boosted the performance of imports, which also signals an increase in the purchasing power of Filipinos. We expect that this further increased in December 2016,” said Socioeconomic Planning Secretary Ernesto M. Pernia.

Imports coming from East Asia — which includes China and Japan — grew 16.5% in November while those from the rest of Southeast Asia grew 31%.

Analysts at Nomura Global Research said in a report that the turnout for November “surpassed expectations” with the 19.7% print above their 16.5% forecast.

“The underlying trend in consumer and capital goods imports has therefore remained strong, notwithstanding some moderation following the May 2016elections, which highlights the strength of consumer and investment spending and we believe will continue to underpin the still- solid growth outlook,” Nomura’s Euben Paracuelles and Lavanya Venkateswaran said in the report.

Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines, shared this view: “Higher purchases of iron and steel (100%), transport equipment ( 76.3%) and industrial machinery and equipment ( 52.2%) point to strong investment spending in the country.”

Import growth is a leading indicator for future factory and export performance because they reflect items shipped into the country for processing, a portion of which is re-exported.

Payments for capital goods grew by 29.7% to $ 2.418 billion during the month.