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Manufacturing activity grows for 14th straight month as economy reopens

REUTERS

MANUFACTURING ACTIVITY in the Philippines grew for a 14th straight month, buoyed by the further reopening of the economy as the number of coronavirus cases declined.

Factory output, as measured by volume of production index (VoPI), inched up by 1.9% year on year in May, preliminary data from the Philippine Statistics Authority’s (PSA) Monthly Integrated Survey of Selected Industries (MISSI) showed on Thursday.

This was higher than the revised 1.2% in April, but significantly slowed from the 267.2% growth recorded in May 2021.

The May result also marked the 14th straight month of manufacturing activity expansion.

In comparison, the Philippines’ manufacturing purchasing managers’ index (PMI) eased to 54.1 in May from 54.3 in April. This was the fourth consecutive month that the PMI remained above 50, which signals growth in the sector.

ING Bank N.V. Manila Branch Senior Economist Nicholas Antonio T. Mapa attributed the factory output growth in May to the economy’s further reopening.

“The latest MISSI numbers reflect trends we see in PMI manufacturing. Economic reopening has helped deliver increased demand for goods and manufacturers are now reporting growth for new orders and production,” Mr. Mapa said in e-mail.

Metro Manila and nearby areas have been under the most lenient alert level since March, as coronavirus disease 2019 (COVID-19) infections remained low.

In a phone interview, Philippine Chamber of Commerce and Industry Honorary Chairman Sergio R. Ortiz-Luis, Jr. said the manufacturing growth was driven by the continued easing of quarantine restrictions which allowed more people to return to work.

Metro Manila and surrounding locations has been placed under the most relaxed Alert Level 1 since March 1 as new COVID-19 cases continue to dwindle.

The PSA noted an expansion in the VoPI in 14 out of 22 industry divisions in May. Manufacture of machinery and equipment except electrical grew by 50.7% from 39.2% in April. There was also expansion seen in chemical and chemical products (35.9% from 39.1%) and fabricated metal products, except machinery and equipment (22.8% from 11.6%.).

Meanwhile, there were contractions in eight industry divisions, led by electrical equipment (-19.7% in May from -17.8% in April). Basic metals (-18.5% from -7%) and printing and reproduction of recorded media (-11.9% from -16%) also saw a decline in activity.

Capacity utilization — the extent to which industry resources are used in producing goods — averaged 70.7% in May, up from 69.4% in the previous month.

Twenty out of 22 industry divisions reported capacity utilization rates of more than 60%.

Mr. Mapa said manufacturing output is expected to rise moderately in the coming months, as soaring prices of basic commodities and fuel may affect production.

“We could see VoPI extend gains although we may be in for some moderation, which would also mirror the recent dip in the latest PMI reading. The global commodity price surge may impact production cost and supply chains, which could dampen momentum as will slower demand as domestic inflation bites,” he added.

Inflation rose to 6.1% in June, the highest in nearly four years, due to faster increases in food and transport costs.

Mr. Ortiz-Luis said factory output growth will continue “except if we will have another restriction which I don’t think will happen.” He also noted that inflation remains manageable as long as it does not reach 8%.

Inflation in the first half averaged 4.4%, breaching the Bangko Sentral ng Pilipinas’ 2%-4% target range but below the 5% forecast for the year. — Mariedel Irish U. Catilogo

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