By Marissa Mae M. Ramos, Researcher

FACTORY production rebounded in February, rising at its fastest pace in 18 months, the Philippine Statistics Authority (PSA) reported on Tuesday.

Preliminary results of the PSA’s Monthly Integrated Survey of Selected Industries (MISSI) showed that in February, factory output — as measured by the Volume of Production Index — grew by three percent year on year.

This was higher than the revised 0.1% growth logged in January but was a turnaround from the 9.3% contraction that was recorded in February 2019. The February result was the fastest growth recorded in 18 months, or since the 3.1% expansion in August 2018.

Moreover, the results in January and February marked the first time factory output was in expansion mode following 13 straight months of contraction.

Year to date, factory output expansion averaged 1.6% compared to the 6.8% average decline in 2019’s comparable two months.

In comparison, the IHS Markit Philippine Manufacturing Purchasing Managers’ Index (PMI) — a leading indicator of manufacturing activity — increased that month to 52.3 from 52.1 in January despite a regional slowdown caused by early supply disruptions of the coronavirus disease 2019 (COVID-19). A reading above 50 signals expected improvement in purchasing activity, while a score below 50 indicates deterioration.

The PSA reported year-on-year gains in 10 out of 20 major industry groups in February, of which six were in double digits. These were printing (38.4%), fabricated metal products (30.3%), machinery except electrical (28%), chemical products (23.8%), beverages (16.9%), and wood and wood products (11.3%).

Capacity utilization rate, which represents how much of factory capacity is in use, averaged 84.6%, with twelve of the 20 sectors registering capacity utilization rates of at least 80%.

In a statement, the National Economic and Development Authority said the production of essential goods and health-related manufactures must be prioritized by the government in its fight against COVID-19.

“For March, we expect that the Enhanced Community Quarantine has weighed heavily on the domestic demand on manufacturing products. Strategies to help the manufacturing establishments affected by the outbreak have to be put in place,” Socioeconomic Planning Secretary Ernesto M. Pernia said in the statement.

“We also expect that the global supply chain disruptions brought by the pandemic will have a negative effect on the manufacturing and merchandise exports,” he added.

UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the country’s factory production has “outperformed” that of neighboring economies at the beginning of this year.

“The global manufacturing industry was set to start a recovery with a better global trade atmosphere and the local industry was ready to ride that said pick up,” he said in an e-mail.

Monthly Integrated Survey of Selected Industries (MISSI) data showed factory output has declined by 8.3% on average last year. Based on PSA’s national accounts, the manufacturing sector’s gross value added to the economy only grew by 3.8% in 2019 — its slowest in a decade.

The government has yet to revise its 6.5%-7.5% GDP growth target this year despite the National Economic and Development Authority (NEDA) expecting the economy to slow between a 0.6% contraction and a 4.3% expansion due to the adverse impacts of the COVID-19.

A spike of reported COVID-19 cases in the country last month prompted the government to impose an enhanced community quarantine (ECQ) in Luzon that was originally scheduled to end on April 12. This has been extended to April 30.

According to UnionBank’s Mr. Asuncion, the ECQ will “definitely… have an adverse effect on manufacturing activity,” noting that more than half of regular manufacturing are discontinued.

“Losers will be non-essential goods related such as consumer electronics, metals, furniture, wood and wood products, etc. Wins will be felt among manufacturing related to health-related activities like medicines, masks, disinfectants, alcohol, etc.,” Mr. Asuncion said.

“Food manufacturing will also grow, especially amidst this COVID-19 pandemic,” he added.

Similarly, Action for Economic Reforms Cofounder and Coordinator Filomeno S. Sta. Ana III said an economic downturn is expected.

“[It is] important for the industry to retain the human capital (the labor force and technicians) and the labor’s productive capacity, so by the time the economy will be rebuilt, the industry will already be positioned to hit the ground running. This, of course, will require government support in helping the industry provide the safety nets to the workers,” Mr. Sta. Ana said in a Viber message.

The Department of Health reported on Tuesday the total number of COVID-19 infections has reached 3,764, with 177 deaths and 84 recoveries.

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