Fac­tory out­put growth de­cel­er­ates

Business World - - Front Page - By Chris­tine J. S. Cas­tañeda Se­nior Re­searcher

FAC­TORY PRO­DUC­TION con­tin­ued growth in Oc­to­ber, al­beit at its slow­est pace so far this year, the Philip­pine Statis­tics Au­thor­ity (PSA) re­ported on Wed­nes­day.

Pre­lim­i­nary re­sults of the PSA’s Monthly In­te­grated Sur­vey of Se­lected In­dus­tries (MISSI) showed that in Oc­to­ber, fac­tory out­put — as mea­sured by the Vol­ume of Pro­duc­tion In­dex (VoPI) — grew 3.9% year-on-year.

This was slower than the re­vised 4.2% growth recorded in Septem­ber and was the small­est in­crease so far in 2018. How­ever, it was a turn­around from Oc­to­ber 2017’s 6.6% de­cline.

Fac­tory out­put vol­ume av­er­aged 11.1% in the 10 months to Oc­to­ber, higher than the 1.9% in 2017’s com­pa­ra­ble pe­riod.

A sim­i­lar trend could be seen in fac­tory out­put as mea­sured by value of pro­duc­tion in­dex (VaPI), which reg­is­tered a year-low 3.3%, even though

it marked a turn­around from last year’s six per­cent de­cline.

Both VoPI and VaPI have gained since Jan­uary. In com­par­i­son, the Nikkei Philip­pines Man­u­fac­tur­ing Pur­chas­ing Man­agers’ In­dex im­proved to 54 in Oc­to­ber from 52 in Septem­ber and 53.7 a year ago, re­flect­ing “solid” im­prove­ment in busi­ness con­di­tions from the pre­ced­ing month that kept the Philip­pines in South­east Asia’s lead in this re­gard.

Av­er­age ca­pac­ity uti­liza­tion — the ex­tent by which in­dus­try re­sources are used in the pro­duc­tion of goods — was es­ti­mated at 84.3%. Eleven of the 20 sec­tors reg­is­tered ca­pac­ity uti­liza­tion rates of at least 80%.

“In­creases in the pro­duc­tion of pe­tro­leum, ex­por­to­ri­ented prod­ucts and non-metal­lic min­eral prod­ucts drove ex­pan­sion of man­u­fac­tur­ing out­put in Oc­to­ber,” the Na­tional Eco­nomic and Devel­op­ment Au­thor­ity (NEDA) said in a state­ment.

Ni­cholas An­to­nio T. Mapa, se­nior econ­o­mist at ING Bank NV Manila, said: “Man­u­fac­tur­ing sec­tor ap­pears to have re­cov­ered from con­trac­tion in 2017.”

“On VaPI, [it] may have been due to dol­lar value of pe­tro­leum prod­ucts that helped the sec­tor post pos­i­tive growth. On VoPI, pe­tro­leum prod­ucts also saw hefty gains, up 30.8% given the de­mand for fuel both lo­cally and abroad,” he added.

Mitzie Irene P. Con­chada, as­so­ciate dean at the De La Salle Univer­sity School of Eco­nom­ics, said: “With the de­pre­ci­a­tion of the peso against the dol­lar, im­ported in­puts and raw ma­te­ri­als have been more ex­pen­sive, hence, a lower VoPI growth…”

Look­ing for­ward, NEDA ex­pects the govern­ment’s spend­ing on in­fras­truc­ture and other cap­i­tal out­lays and ex­pan­sion of pri­vate sec­tor con­struc­tion ac­tiv­i­ties to drive growth in the man­u­fac­tur­ing of con­struc­tion­re­lated prod­ucts.

“Over the near-to medium-term, we see that the Build, Build, Build pro­gram and the re­cently signed Reg­u­lar For­eign In­vest­ment Neg­a­tive List will help in rais­ing the pro­duc­tiv­ity of the man­u­fac­tur­ing sec­tor,” NEDA’s state­ment quoted its di­rec­tor-gen­eral, So­cioe­co­nomic Plan­ning Sec­re­tary Ernesto M. Per­nia, as say­ing.

Mean­while, Mr. Mapa noted that the re­duc­tion in food man­u­fac­tur­ing might drag eco­nomic growth this quar­ter.

“One devel­op­ment I note as a con­cern is the con­trac­tion in food man­u­fac­tur­ing, both in terms of VoPI and VaPI. In GDP (gross do­mes­tic prod­uct), food man­u­fac­tur­ing ac­counts for the lion’s share of the to­tal sec­tor, which could mean fourth quar­ter GDP man­u­fac­tur­ing may be ham­pered, un­less we see a turn­around in Novem­ber and De­cem­ber.”

The VaPI and VoPI of the food man­u­fac­tur­ing seg­ment posted 13.2% and 14.9% con­trac­tions in Oc­to­ber, wors­en­ing from their re­spec­tive de­clines of 8.2% and 8.3% in Septem­ber.

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