A COMPOSITE INDEX measuring sales generated by Philippine companies across all industries posted its biggest decline on record in the second quarter, as most business operations were disrupted by lockdown restrictions, the Philippine Statistics Authority (PSA) reported on Thursday.

Data from the PSA’s Quarterly Economic Indices (QEI) report showed total gross revenue index, which measures sales earned by companies, contracted by 26.8% in the three months to June when the economy was pummeled by the coronavirus pandemic and subsequent lockdown. This was faster than the 6.9% decline in the previous quarter and a reversal of the 6.2% growth in the second quarter of 2019.

The second-quarter reading marked the index’s biggest contraction based on available quarterly data dating back to 2000, with 2016 as base year.

Of the eight sectors in the index, only financial and insurance activities posted year-on-year growth with 10.1% in the second quarter, albeit this was slower than the 12.5% expansion in the same quarter last year.

Meanwhile, the biggest decline in revenues was observed in the transportation, storage and communication sector, which fell by 44.7% compared with a 6.2% growth last year.

Other sectors also saw drastic declines in revenues, such as real estate (-35.8% from 7.6%), manufacturing (-35.3% from 1.8%), mining and quarrying (-29.1% from 4%), trade (-20.8% from 13.2%), and electricity, gas and water supply (-15.5% from 9.7%).  

Meanwhile, the employment index further contracted by 15.1% in the second quarter from the 1.7% dip logged in the previous quarter and the 1.9% growth in the second quarter of 2019.

All sectors saw their employment indices slip during the period. The construction sector had the biggest drop in employment at -29.6%, followed by transportation, storage and communication (-18.8%), manufacturing (-15.2%), and mining and quarrying (-11.2%).

The total compensation index likewise slumped 14.4% in the April-June period from a 6.7% growth a year earlier, led by transportation, storage and communication (-31.1%), construction (-26.8%), manufacturing (-20.5%), other services (-14.3%), mining and quarrying (-14.3%), trade (-13.4%), and real estate (-8%).

On a per-employee basis, compensation inched up 0.9% from last year using current prices. At constant 2016 prices, however, it went down by 1.3%.

In an e-mail, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the steep decline in gross revenues reflected the economy’s GDP performance during the period.

“At 16.5% decline for [second-quarter] GDP, it is hard not to imagine that the gross revenue index for the same period would have the same fate,” Mr. Asuncion said.

“Looking at the numbers, the same sectors of the economy suffered the same declines beginning with transportation, storage and communication. Note that much of services registered parallel declines mirroring Q2 GDP, followed next by manufacturing,” he added.

The second-quarter GDP performance sent the Philippine economy to a recession for the first time in nearly three decades. In the April-June period, GDP plunged by 16.5% — the sharpest decline since the 10.7% drop recorded in the third quarter of 1984.

Among the sectors that posted the biggest drop in their gross value added include accommodation and food service activities (-68%), other services (-63%), transportation and storage (-59.2%), construction (-33.5%), mining and quarrying (-24.5%), and manufacturing (-21.3%).

Meanwhile, the country registered an unemployment rate of 10% in the July round of the PSA’s labor force survey, easing from the 17.7% rate in April but still higher than the 5.4% jobless rate in July 2019. This translated to 4.571 million jobless Filipinos in July versus 7.254 million in April and 2.437 million in July last year.

In a separate e-mail, ING Bank N.V. Manila Senior Economist, Nicholas Antonio T. Mapa expects a slight pick up in employment and compensation despite the “broad-based” decline in the gross revenue judging from the government’s recent jobs data.

“Compensation, however, will still likely be lower on a year-on-year basis,” he said.

Rajiv Biswas, IHS Markit Asia Pacific chief economist, expects the gross revenue index to recover in the coming quarters.

“Although the continuing high number of new COVID-19 (coronavirus disease 2019) cases will continue to constrain the pace of recovery, gradual improvement in economic momentum is expected during the remaining months of 2020, with strong positive economic growth forecast for the 2021 calendar year,” Mr. Biswas said. — Ana Olivia A. Tirona