Moody’s sees growth of production slowing

FACTORY OUTPUT likely sustained growth in February although at a slower pace, with a recovery of global demand and strong domestic activity fueling production to increase further, Moody’s Analytics said in a note.

Manufacturing likely increased by 8.7% for the month, the sister firm of debt watcher Moody’s Investors Service said, which if realized would slow from a 9.3% rise posted in January and from an 11.6% hike recorded in February 2016.

“The domestic economy continues to drive the rapid increases in manufacturing output as infrastructure projects and rising incomes support demand,” Moody’s analyst Jack Chambers said in a market data preview released on Friday.

The Philippine Statistics Authority (PSA) is scheduled to report its monthly manufacturing and trade data on Tuesday.

Moody’s estimate would be the slowest pickup in manufacturing in nine months, or since an 8.2% climb tallied in May 2016, according to PSA data.

STILL ‘STRONG’

Still, the research unit expects industrial production to remain “strong” in February, even though output growth is expected to remain in single-digit pace.

“Global conditions have also become more supportive of manufacturing, as evidenced by the improvements in merchandise exports from the Philippines…” the note read.

Exports jumped by 22.5% in January, turning around from a 3.9% decline posted a year ago and surging from December’s 6.3%, according to latest available PSA data.

There were two other months last year that saw shipments of Philippine goods increase, namely: September and October that saw 5.1% and 7.6% increments, respectively.

The International Monetary Fund expects Philippine exports to recover this year as global growth is seen to pick up. The multilateral lender expects world output to recover to 3.4%, coming from a 3.1% climb in 2016.

Total factory output rose in January led by a surge in wood and wood products, which grew by over twofold from a year ago. Basic metals grew by 59.2%, followed by footwear and wearing apparel which rose by 50.1%.

Other sectors that posted double-digit increases were transport

equipment ( 46.6%), petroleum products (45.3%), food manufacturing (28.6%), fabricated metal products (21.1%), machinery except electrical parts (14.7%), and textiles (14.4%), according to PSA data.

Volume of factory output increased by 14.4% last year.

The government is looking to spur manufacturing growth by 8-10% annually until 2022, banking on strong expansion of the Philippine economy that is targeted to clock as fast as 7-8% starting next year.

PURCHASING MANAGERS’ INDEX

Another widely tracked index saw factories in the Philippines cap a four-month growth slowdown in February, even as that pickup was overtaken by Vietnam’s performance that put that neighbor in the lead in Southeast Asia.

The Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI) bared a 53.6 reading that month from January 2017’s 52.7 that was the weakest, so far, since the Philippine survey began in January last year.

The manufacturing PMI consists of five sub-indices, with new orders having the biggest weight at 30%, followed by output (25%), employment ( 20%), suppliers’ delivery times (15%) and stocks of purchases (10%).

February saw Vietnam, with 54.2, outperforming the Philippines in the Nikkei ASEAN Manufacturing PMI and taking Southeast Asia’s helm. Vietnam widened its lead with 54.6 in March, against the Philippines’ 53.8. —