Factory output may have improved in Dec on back of holiday, infrastructure spending

THE production of new goods and the implementation of infrastructure projects likely improved the country’s factory output in December to make up for the poor showing in the past months, according to a private sector forecast.

In The Market Call report for December, the First Metro Investment Corp. and the University of Asia and Pacific said manufacturing output could pick up in the fourth quarter, driven by the

creation of new products, rollout of public infrastructure and the increased consumption during the holiday period.

The Philippine Statistics Authority on Tuesday reported factory output in November contracted 6.1 percent—the 12th consecutive month it declined tracing back to 2018.

“Despite the unremarkable factory output performance, we still think that manufacturing output may improve in [the fourth quarter] amidst rapid infrastructure implementation,” the report read. Stronger consumer demand during the Christmas season should, likewise, provide a further boost.

The report added the country’s manufacturing purchasing managers’ index (PMI) in November registered its slowest in five months at 51.4, from 52.1 in October, but this number managed to outdo the Southeast Asian average of 49.2.

Further, the Philippine performance placed second in the region next to Myanmar’s PMI, which read 52.7 during the month. A reading above 50 suggests output expansion.

In spite of the slowdown caused by minimal foreign orders that translated into weak sales, the report bared business sentiments remain positive on the production of new goods.

“Lower foreign new orders and weak sales primarily caused the slowdown,” the report stated. “Business expectations, however, appeared positive on the back of expected higher new products factory production.”

As such, the report concluded manufacturing output will rebound in the tail end of last year as proven by the Philippines sustaining an above 50 PMI in October.

The 6.1-percent contraction in November’s factory output was influenced by decreases in the indices of eight major industry groups. The declines were highest in furniture and fixtures (-41.2 percent), basic metals (-29.5 percent), miscellaneous manufacturers (-22.1 percent), petroleum products (-21.8 percent), transport equipment (-16.7 percent), as well as in electrical machinery (-13 percent).

The Philippine manufacturing output has been declining for 12 consecutive months with deepest contractions were posted last April at 14 percent, last June at 10.5 percent and in December of 2018 at 10.1 percent.