All-industry revenue growth eases in Q3

REVENUE across all industries grew in the third quarter, but eased from a year earlier, the Philippine Statistics Authority (PSA) said.

According to the PSA’s Quarterly Economic Indices (QEI) report, the total gross revenue index, which measures sales generated by companies, expanding by 7.6% in the three months to September.

The third-quarter reading was higher than the 6.2% posted in the second quarter, but less than the 9.7% in the third quarter of 2018.

The third-quarter QEI uses 2016 as the base year. Previous iterations of the report used 1978 as the base year.

All industries expanded during the period except for mining and quarrying, which declined 6.2%, a reversal of its 3.7% growth a year earlier.

Trade recorded the fastest growth of all sectors during the quarter, gaining 12.6%, faster than the 7% posted a year earlier.

Other sectors growing faster were “other services” (8.5% from 6.2%) and transportation, storage and communication (6.4% from 4.9%).

Revenue growth decelerated in financial and insurance activities (12.5% from 13.9%); electricity, gas and water supply (7.8% from 11.8%); real estate (6.8% from 13.4%); and manufacturing (5.4% from 10.6%).

Meanwhile, employment growth across key industries eased during the period as the total employment index grew by 1.7% compared to 1.9% a year earlier.

Sectors posting growth in employment during the period were manufacturing (4.5%); financial and insurance activities (3.6%); transportation, storage, and communication (3.2%); electricity, gas and water supply (2%); trade (1.2%); real estate (1.1%); construction (1%); and other services (0.4%).

On the other hand, the mining and quarrying employment index declined 7.7%.

Compensation growth accelerated to 5.3% in the third quarter from 3.3% in the third quarter of 2018. Backing this growth were electricity, gas and water supply (17.1%); manufacturing (9.3%); construction (8.4%); trade (4%); real estate (3.6%); other services (3.6%); financial and insurance activities (2.8%); mining and quarrying (0.5%); and transportation, storage and communication (0.2%).

On a per-employee basis, compensation grew 3.6% from 1.3% a year earlier.

Security Bank Corp. Chief Economist Robert Dan J. Roces noted the faster quarter-on-quarter growth in gross revenue, attributing it to “higher government spending that only began to pick up at the start of the second half.”

“This also explains why year-on-year comparison shows slower growth as industries reeled from the effects of a delayed budget, among others,” he said in an e-mail.

Mr. Roces also cited “tamer” inflation levels during the quarter, which helped household consumption to recover, as well as “relatively stable” labor market prospects with unemployment at “historically low levels.”

Meanwhile, ING Bank NV-Manila Senior Economist Nicholas Antonio T. Mapa noted the year-on-year slowdown in the third-quarter gross revenue index, which is driven by slower revenue growth in the manufacturing sector.

“Industry is dominated by manufacturing, in particular food manufacturing, but the drag on industry-wide performance is likely linked to the pullback in the petroleum subsector due to lower global crude oil prices,” Mr. Mapa said in a separate e-mail.

Gross domestic product (GDP) grew 6.2% in the third quarter, the fastest clip so far this year and picking up as well from the year-earlier 6% based on PSA’s national accounts. Government spending growth was 9.6%, faster than the 7.3% in the second quarter, albeit slower than the 14.3% a year earlier.

Third-quarter headline inflation was 1.7% in the third quarter, down from 3% in the second quarter mainly due to lower food inflation. This brought the year-to-date average to 2.8%, which is within the government’s 2-4% target range for the year.

“We could see fourth-quarter industry revenue post a decent clip for growth with food manufacturing expected to perform well compared to last year,” ING’s Mr. Mapa said.

In the year to date, manufacturing accounted for nearly two-thirds of the total industry sector output and 21.2% of GDP. Meanwhile, food manufacturing made up the biggest share of manufacturing’s gross value added at nearly a fourth.

“If we remember, crop damage stemming from severe weather disturbances knocked back food manufacturers but 2019 could be different. The counter to this growth will likely be a sustained struggle in communications income as export growth remains subdued on the global trade war,” he added.

Security Bank’s Mr. Roces said revenue growth is expected to pick up in the next quarter amid more substantial government spending, manageable inflation, and a stable labor market. — Carmina Angelica V. Olano