By Marissa Mae M. Ramos

REVENUE across all industries grew in the first quarter of 2019 as stronger sales were reported across key industries, the Philippine Statistics Authority (PSA) reported yesterday.

Quarterly economic indices of key industries

Data from the PSA’s latest Quarterly Economic Indices (QEI) report showed total gross revenue index, which measures sales generated by companies, expanding by 8.1% in the first three months of the year.

The latest QEI report used 2016 as the base year for the first time. In previous versions, it used 1978 as the base year.

The first quarter reading was slower than the 9.3% recorded in the fourth quarter of 2018, albeit faster than the 7.3% logged in the first quarter of 2018.

To compare, the Philippine economy grew 5.6% in the first quarter of 2019, its worst performance in four years, or since the 5.1% logged in the first quarter of 2015.

Analysts expect the economy to bounce back in the second quarter. The PSA will report on the second quarter gross domestic product (GDP) on Aug. 8.

“Despite the sub-six percent economic growth for the same quarter, the growth in major industries’ gross revenues reflect an improved economic environment amid tapering consumer prices during the period,” Security Bank Corp. chief economist Robert Dan J. Roces said in an e-mail.

UnionBank of the Philippines, Inc. chief economist Ruben Carlo O. Asuncion noted the Philippine economy’s steady growth consequently led to higher employment and wages.

“The continued increase in foreign direct investments, fiscal policy reform, steady level of prices, and a productive population with a favorable demographic mix — all contribute to a growing economy resulting in more jobs and better opportunities for everyone,” Mr. Asuncion said in a separate e-mail.

Expansion was observed across all industries during the period. Leading the way was financial and insurance activities whose revenues grew 14.6% in the first quarter of 2019, faster than the 12.4% growth in 2018’s comparable three months.

Next in line were growth seen in transportation, storage and communication (14.5% from 5.6%); trade (14.4% from 7.3%); real estate (12.4% from 8.9%), other services (6.7% from 1.5%).

On the other hand, revenue growth slowed in manufacturing (5.3% from 7.4%); electricity, gas and water supply (4.7% from 13.2%); and mining and quarrying (2.6% from 16.9%).

“Some industries have done better in terms of higher year-on-year revenues growth in the first quarter of 2019 amid the sharp decline in inflation and interest rates that increase the incomes and spending power of both consumers and businesses, as the slowdown in first quarter GDP (gross domestic product) growth was largely due to the delay in the approval of the 2019 national budget…,” Michael L. Ricafort, Rizal Commercial Banking Corp.’s (RCBC) economics research division head, said in an e-mail interview with BusinessWorld.

“Thus, the faster revenues growth in the first quarter for some sectors in the economy does not come as a surprise, as consumer spending (which accounts for about 70% of the economy) and services (which account for nearly 60% of the economy) both managed to grow much faster from a year ago and vis-a-vis headline GDP growth,” he added.

Security Bank’s Mr. Roces noted that a rebound in household spending drives industrial gross revenues as well.

“Services, tied with better consumption, remain a major driver in industry especially BPOs (business process outsourcing), which provides a steady stream of employment and wage growth.”

Meanwhile, the total employment index expanded 1.7% in the first quarter compared to 1.3% during the same quarter last year. Sectors posting growth during the period were transportation, storage and communication (4.3%); trade (2.7%); manufacturing (2.5%); mining and quarrying (2.3%); financial and insurance activities (1.6%); real estate (1.3%); electricity, gas and water supply (1.2%); and other services (0.8%).

Construction, on the other hand, saw its employment index decline by 0.3%.

Compensation growth accelerated to 4.6% during the period from 3.3% growth in the first quarter of 2018. Backing this growth were electricity, gas and water supply (9.8%); mining and quarrying (9.2%); construction (8.6%); manufacturing (7.7%); other services (4.7%); financial and insurance activities (2.4%); real estate (1.9%); transportation, storage and communication (1.8%); and trade (0.3%).

On a per employee basis, compensation grew 2.9% from 2.0% last year.

RCBC’s Mr. Ricafort said that the faster growth in the compensation index per employee at current prices reflected the effects of the elevated inflation in the latter part of last year up to the early part of this year. In particular, he attributed construction’s 8.9% growth in its compensation per employee index to “some tightness in the labor supply of construction workers as reported in recent years.”

“[A]t constant prices, [total] compensation index per employee declined by 0.9% after excluding the effects of higher inflation,” Mr. Ricafort explained.

He added that the faster growth seen in the employment and compensation indices in the first quarter “may be attributed to strong Philippine employment data” amid “continued growth in both local and foreign investments… that entailed the creation of more jobs in the economy.”

Preliminary results of the PSA’s April 2019 round of the Labor Force Survey (LFS) put the employment rate at 5.1%, down from the 5.5% rate in the same survey round last year. Meanwhile, the underemployment rate — or the proportion of those working but looking for more work in order to increase their incomes — improved to 13.5% from 17%.

Among the April LFS rounds, both the unemployment and underemployment rates in April 2019 were the lowest since 2005, the year the government adopted new definitions for the LFS.

Moving forward, economists expect these economic indices to improve in the coming quarters.

For Security Bank’s Mr. Roces, the central bank’s “pro-growth” stance, along with increases in investments and infrastructure spending “may drive revenues up further in the coming quarter.”

UnionBank’s Mr. Asuncion said the impact of the first quarter economic growth slowdown “will not be significant and will be temporary.”

“Second quarter [industry gross revenue growth] may be an improvement from last year and better quarter-on-quarter,” he said.