Factory output expands at slower pace

The country’s manufacturing output grew in 2022, albeit at a slower pace than the previous year, as growth eased in some industry divisions, while some posted contractions, according to the Philippine Statistics Authority (PSA).

Preliminary results of the Monthly Integrated Survey of Selected Industries released by the PSA yesterday showed manufacturing output as measured by the Volume of Production Index (VoPI) posted an average growth of 15.2 percent in 2022, a slowdown from the 52.6 percent average growth in 2021.

In 2020, factory output as measured by VoPI contracted by 40.5 percent.

The PSA attributed the slower increase in average growth of VoPI last year primarily to the manufacture of computer, electronic and optical products, which posted lower growth of 15.1 percent in 2022 from 36.2 percent in 2021.

It also cited the manufacture of basic metals, which contracted by 22 percent last year, a reversal of the 15.4 percent growth in 2021.

PSA said the manufacture of food products, which was the third main contributor, registered a lower growth of 5.6 percent last year from 15.9 percent in 2021, due to the contraction in the manufacture of prepared animal feeds, as well as slowdowns in the processing and preserving of fruits and vegetables; and processing and preserving of meat.

In December alone, the VoPI for manufacturing grew by 4.8 percent, easing from the 5.9 percent increase in November last year, and the 19.2 percent uptick in December 2021.

Rizal Commercial Banking Corp. chief economist Michael Ricafort attributed the slower growth in VoPI in December “to the higher number of holidays that somewhat slowed down manufacturing or production activities during the month; as well as higher prices or inflation, higher interest rates, risk of US recession that are drags on manufacturing and investment activities.”

He said the slower growth in the manufacturing gauge, particularly from last year, may also have to do with the normalization of the base or denominator effects.

PSA data showed the Value of Production Index (VaPI) for manufacturing also registered a slower average growth of 22.5 percent last year from the 49.2 percent average expansion in 2021.

Main contributors to the slower increase in the average growth of VaPI last year identified by the PSA are the manufacture of basic metals, which contracted by 16.3 percent, and manufacture of electrical equipment as it declined by 48.4 percent.

Based on responding establishments, the average capacity utilization rate for the manufacturing sector was 71.6 percent in December last year, lower than the 72.6 percent in November 2022.

The agency said 24.3 percent of the total responding establishments operated at full capacity (90 percent to 100 percent) in December.

Meanwhile, 40.7 percent operated at 70 to 89 percent capacity, while 35 percent operated below 70 percent capacity.