Philippines’ March factory output contracts for second month

MANUFACTURING OUTPUT contracted for a second consecutive month in March, though the decline narrowed as food output increased, the Philippine Statistics Authority (PSA) reported on Wednesday.

According to the preliminary results of the PSA’s Monthly Integrated Survey of Selected Industries, factory output, as measured by the volume of production index, fell 0.2% year on year in March.

The revised February reading had been a 1.5% decline, while the March 2024 contraction had been 5.1%.

March output rose 2.3% month on month, reversing the 3.5% drop in February. Stripping out seasonality, manufacturing output that month dropped 4%.

The PSA said the industries that drove manufacturing growth were food products (18.8% in March from 13.5% in February); transport equipment (5% from -1.3%); and computer, electronic and optical products (2.2% from 0.2%).

“Aside from seasonality, the first quarter being a slow production month across industries, I believe manufacturing industries are anxious about possible production disruptions due to US President Donald J. Trump’s tariffs. Hence, many consider it wise to exhaust existing inventory before beginning a new production cycle,” Cid L. Terosa, senior economist at the University of Asia and the Pacific, said via e-mail.

Mr. Terosa also added that monetary policy and inflationary pressures in March contributed to the flat performance of manufacturing.

“Many industries are awaiting possible changes in interest rates in the next quarter,” Mr. Terosa said.

In April, Mr. Trump announced a schedule of “reciprocal” tariffs on most US trading partners, with Philippine goods being assigned the second-lowest rate in Southeast Asia of 17%.

The Monetary Board resumed its easing cycle, lowering the target reverse repurchase rate by 25 basis points to 5.5%.

Rates on the overnight deposit and lending facilities were also cut to 5% and 6%, respectively.

“Soft manufacturing activity may be tied to the lingering concerns about the impending tariff trade wars.  The contraction tracked the negative PMI report in March as well,” Nicholas Antonio T. Mapa, chief economist at Metropolitan Bank & Trust Co., said in an e-mail.

The S&P Global Philippine Manufacturing Purchasing Managers’ Index (PMI) was 49.4 in March, against the 51 reading in February.

PMIs are a forward-looking gauge of manufacturing activity, reflecting the raw materials ordered for future processing into manufactured goods.

A PMI reading below 50 points to a contraction in future manufacturing activity, while expansions are signaled by PMIs above 50.

Philippine Chamber of Commerce and Industry Honorary Chairman Sergio R. Ortiz-Luis, Jr., said by telephone that manufacturing generally improved in line with the broader economy.

“The supply chains continue to improve. And I think it was a trend, especially in manufacturing. Production output in April will be better,” Mr. Ortiz-Luis said.

Capital utilization averaged 76.2% in March, against the 75.9% posted in February. All industry categories averaged capacity utilization of more than 50% during the month.

Going forward, Mr. Mapa said that manufacturing production may be more driven by the trade outlook.

“Domestic demand may offset the moderation in export demand however as domestic economic activity remains robust,” Mr. Mapa said.

“Manufacturing output in April will be slower than last year and March 2025. Heightened trade tension between the US and China plus weak export markets have made prospects for manufacturing production dimmer,” Mr. Terosa said. — Lourdes O. Pilar