Factory output declines for third straight month

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The latest Monthly Integrated Survey of Selected Industries showed factory output, as measured by the Volume of Production Index (VoPI), contracted by 40.3% in May. — REUTERS

By Lourdes O. Pilar, Researcher

FACTORY OUTPUT declined for the third straight month in May although the pace of contraction slowed, the Philippine Statistics Authority (PSA) reported on Tuesday.

Preliminary results of the PSA’s latest Monthly Integrated Survey of Selected Industries (MISSI) showed factory output, as measured by the Volume of Production Index (VoPI), contracting by 40.3% year on year in May.

The May decline was slightly slower than the -43.6% recorded in April, but faster than -7.8% in May last year.

Year to date, the decline in factory output averaged 17.9% compared with the 8.8% decline in 2019’s comparable five months.

The PSA MISSI reported year-on-year VoPI declines in all of the 20 industry groups, of which 18 were in double digits led by petroleum products (-91.4%), transport equipment (-79.3%), and footwear and wearing apparel (-76.6%).

Factory output as measured by the Value of Production index (VaPI) dropped by 42.1% in May, easing from -45.5% in the previous month.

Average capacity utilization — the extent to which industry resources are used in the production of goods — averaged 73.4% in May. Only five of the 20 sectors registered capacity utilization rates of at least 80%.

In a statement, the National Economic and Development Authority (NEDA) noted the sector is “showing signs of recovery” through the increase in its capacity utilization.

“As a whole, capacity utilization increased to 73.4% in May compared with 71.2% in April. In particular, capacity utilization of some of the largest sub-groups food and beverage manufacturing increased to 76.6% and 67.0% in May compared with April 2020, at 76.2% and 30.9%, respectively,” the NEDA said.

“In addition, while year-on-year VoPI and VaPI declined by 40.3% and 42.1%, respectively, in May, they are better than the revised VoPI and VaPI of -43.6% and -45.5% recorded in April 2020,” it added.

Moreover, NEDA pointed to the country’s improved performance in the IHS Markit Philippine Manufacturing Purchasing Managers’ Index (PMI) to 49.7 in June from 40.1 in May and 31.6 in April. The PMI, in which a reading above 50 indicates an improvement in business conditions, showed factory activity remaining in contraction in June, but slower than in the previous months.

“The low production and sales indices for the manufacturing sector are expected given that most of the country was still on enhanced community quarantine in May. Demand was also subdued as people’s mobility remains limited. Despite this, we are seeing some signs of resurgence in the sector,” Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said in the NEDA statement.

Security Bank Corp. Chief Economist Robert Dan J. Roces said the stricter community quarantine dragged manufacturing volume in May.

“However, a slight increase then in the capacity utilization of factories shows some signs of improving output, probably stemming in part from demand for some items,” he said in an e-mail.

“We could see some improvements in the June data as readings for that month will capture the general community quarantine shift of most areas. However, improved manufacturing volume may only be higher in some essential goods as consumption slowly recovers,” he added.

UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion also expects June volume data to improve. “Capacity may increase as more production may come online with less stringent virus containment measures,” he said in a separate e-mail.

Philippine Exporters Confederation, Inc. President Sergio R. Ortiz-Luis, Jr. noted the constraints the lockdown had imposed on the economy as transportation was severely limited.

“The companies are opening, but people cannot go to work because there is no transportation. I hope they quickly solve the issue,” he said in a phone interview.





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