MANUFACTURING SLOWED in July after coming from a high base a year ago, the Philippine Statistics Authority (PSA) reported on Thursday.
Preliminary results of the PSA’s latest Monthly Integrated Survey of Selected Industries (MISSI) showed the factory output as measured by the volume of production index (VoPI) grew by 2.5% year on year in July, but drastically slower than the 534.4% in the same month a year ago.
However, this was higher than the revised 0.7% growth in June.
This was the second straight month of year-on-year growth since the revised 0.3% decline in May.
Factory output averaged 24.1% in the first seven months of 2022.
In a statement, the PSA attributed the July factory growth to the annual growth seen in 17 out of 22 industry divisions, led by fabricated metal products except machinery and equipment (30.3% from 45.8% in June); machinery and equipment except electrical (29.1% from 46.6%); and wood, bamboo, cane, rattan articles, and related products (28.5% from 31.3%).
Meanwhile, eight industry divisions reported declines in July, led by manufacture of electrical equipment (-52.7% from -46.8% in June), basic pharmaceutical products and pharmaceutical preparations (-18.6% from 10.8%) and tobacco products (-18.6% from -0.9%).
In comparison, S&P Philippines Manufacturing Purchasing Managers’ Index (PMI) stood at 50.8 in July, signaling expansion although slower than the 53.8 reading in June.
The slower annual increase in the factory output in July was due to base effects after manufacturing output posted a triple-digit growth last year, analysts said.
“[Year-on-year] growth rates are distorted because of high base effects,” China Banking Corp. Chief Economist Domini S. Velasquez said in a Viber message. “Sometimes it’s better to look at month-on-month [growth] especially if we need to see the impact of higher prices.”
On a monthly basis, VoPI in July dipped 0.3% from June.
“Moving forward, higher producer prices will continue to affect the manufacturing sector in terms of expansion plans and hiring more workers,” Ms. Velasquez said.
In a phone interview, Philippine Chamber of Commerce and Industry Honorary Chairman Sergio R. Ortiz-Luis, Jr. said high input costs hurt the manufacturing sector although he expects prices to stabilize in the coming months.
Capacity utilization rate in the manufacturing sector averaged 71.3% in July, up from 71.2% in June, and from 65.8% in July 2021. Twenty out of 22 sectors posted utilization rates of at least 60%.
In an e-mail interview, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that higher utilization rates in all sectors are a good indicator of an improving economy.
“For the coming months, manufacturing capacity utilization could pick up further, as the economy reopened further towards greater normalcy, with Metro Manila and other areas having eased to the lowest Alert Level 1 since March 2022… [T]hereby would allow some manufacturing businesses/industries to operate at higher capacity,” he said.
For the coming months, factory output is expected to stabilize as inflation steadies and production prices drop.
“Similar to PMI, we expect MISSI to stabilize in the next few months. A continued rise in production prices and interest rates will inhibit robust growth until at least early 2023,” Ms. Velasquez said. — Bernadette Therese M. Gadon
