Sluggish post-holiday demand drags down Phl manufacturing in December

Sluggish demand after the holiday season caused the domestic manufacturing sector to contract in December 2018, the National Economic and Development Authority (NEDA) said.

The Monthly Integrated Survey of Selected Industries (MISSI) of the Philippine Statistics Authority (PSA) showed domestic factory output declined both in terms of volume and value. The Volume of Production Index (VoPI) and Value of Production Index (VaPI), contracted by 10.1 percent and 9.3 percent, respectively.

For the entire 2018, the manufacturing sector grew 7.2 percent in terms of volume and eight percent in terms of value.

“We have expected this decline because the holiday season is over. These figures could also indicate a likely tepid growth consistent with the latest Business and Consumer Expectations Survey of the Bangko Sentral ng Pilipinas,” said Socioeconomic Planning Secretary Ernesto Pernia.

Lower output was seen for major industry groups such as printing, chemical products, tobacco products, food, basic metals and machinery.

During the reference month, factories across 20 subsectors operated at an average ca- pacity utilization rate of 84.3 percent.

The Purchasing Managers’ Index (PMI) for December 2018 likewise reflected weaker business conditions as firms cut down on output amid slower growth in new orders.

NEDA expects a rebound in manufacturing in the coming months because of election-related spending that can benefit subsectors such as food, beverage, tobacco, as well as printing and paper products.

Pernia said exempting key infrastructure projects from the 2019 election spending ban would also support the domestic manufacturing sector as this would pave the way for the continous implementation of flagship infrastructure projects.

Risks to the manufacturing sector’s growth include rising domestic pump prices and the occurrence of El Niño this year that can affect production and pricing of goods.

To boost the performance of manufacturing, Pernia said the government may look into the concerns raised by exporters and importers on port process bottlenecks which hamper the flow of goods.

These include the management of empty containers, the need for an alert status on chemical importations, and the processes involving x-ray cargo inspection in international ports.

“If found to warrant government action, the early resolution to these concerns can ease trade facilitation and would benefit the country’s manufacturing sector, particularly micro, small and medium enterprises,” Pernia said.

In the case of food manufacturing, Pernia emphasized that reviewing and examining the current restrictions in the country’s sugar industry is also deemed necessary.

“We see the need for a more liberalized regulatory environment in the sugar industry in order to bring down the domestic price of sugar and in turn, benefit food and beverage manufacturers, as well as ordinary households,” he added.