FACTORY PRODUCTION continued to expand in March albeit at a decelerated pace, the Philippine Statistics Authority (PSA) reported on Friday.
Preliminary results of the PSA’s Monthly Integrated Survey of Selected Industries (MISSI) showed factory output — as measured by the volume of production index — grew 13.6% annually in March.
This was faster than the 12.3% recorded in the same month last year, but slower than February’s 23.7% pace.
Nevertheless, production continued to grow by double-digits so far this year. Factory output volume averaged 18.6% year-to-date, faster than the 12.4% recorded in 2017’s comparable three months.
Average capacity utilization, which is the extent by which industry resources are used in the production of goods, was estimated at 84.2%. Twelve of the 20 sectors registered capacity utilization rates of 80% and above.
The latest result was echoed in IHSMarkit’s seasonally adjusted Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI), which stood at 52.7 in April, slightly up from March’s 51.5. A PMI reading above 50 suggests improvement in business conditions, while a score below signals deterioration.
“The positive performance of manufacturing is expected to continue in the first semester, amid the sustained economic growth momentum, increased net foreign direct investments, higher OFW (overseas Filipino workers) cash remittances, and favorable merchandise trade,” said Socioeconomic Planning Secretary Ernesto M. Pernia said in a statement on Friday.
Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines (LANDBANK), said the results showed the increase in factory output was “to meet growing domestic demand.”
“Despite rising prices, domestic demand remained firm amid strong government spending and a recent personal income tax cut, which increased households’ disposable income. The strength in the manufacturing sector is less likely a result of external demand, as export growth has been decelerating recently,” he said.
Sergio R. Ortiz-Luis, Jr., president of Philippine Exporters Confederation, Inc., concurred: “It’s obvious that the economy’s perking up. Manufacturing has been growing [and], as a matter of fact, it is even outpacing services, so we are expecting for the manufacturing to continue to grow,” he said.
For Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, the double-digit growth “is directly related to manufacturing growth that has been robustly increasing since 2017.”
“Industry growth is largely driven by the manufacturing sector since last year, and this momentum has seemingly carried over this first quarter.”
For Mr. Pernia, the “strong growth of the sector” is seen to provide an additional boost to manufacturing’s gross value added in the first quarter.
“The robust manufacturing production for the first quarter of 2018 is supported by the increased production in food manufacturing, petroleum products, electrical machinery, and non-metallic mineral products.”
PSA data showed eight major sectors contributing to the growth in the volume output. These were printing (107.6%); textiles (32.9%); food manufacturing (28.0%); miscellaneous manufactures (15.5%); petroleum products (15.3%); wood and wood products (15.0%); non-metallic mineral products (12.7%); and electrical machinery (11.9%).
Economists were optimistic on manufacturing’s growth prospects.
LANDBANK’s Mr. Dumalagan said manufacturing output is expected to grow at a healthy pace in April 2018, fuelled by the same factors that propelled production in the first quarter.
“The government’s ‘Build, Build, Build’ program is expected to keep domestic demand firm and prompt factories to further expand their production. While consumer spending is likely to remain strong amid higher disposable income, the persistent increase in inflation could somehow temper buying behavior in the future. This could result in slower output growth if not addressed,” the economist said.
UnionBank’s Mr. Asuncion concurred, saying that he expects manufacturing “to growfurther with growing investment, both public and private.” — Lourdes O. Pilar

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