By means of Beatriz Marie D. Cruz, Reporter
According to the Philippine Statistics Authority (PSA), factory output fell to the lowest level in four months in August due to slower growth in electronics and food production.
Preliminary results from the agency’s Monthly Integrated Survey of Selected Industries (MISSI) showed that factory output, as measured by the volume production index (VoPI), fell year-on-year from 6.8% in July and 5 .6% a year earlier to 2.8%.
This was also the lowest annual growth in the manufacturing sector since 1.4% in April, PSA data showed.
Month-on-month, the manufacturing VoPI fell 0.9% from July’s 3.9% increase. Excluding seasonal factors, factory output fell 7.6% in August, compared to 10.5% a month earlier.
This brought average industrial output growth over the eight-month period to 1.7%, slower than 5.4% in 2023.
In comparison, S&P Global’s Philippine Manufacturing Purchasing Managers’ Index (PMI) rose to 53.7 in September from 51.2 in August. It was the fastest PMI since 53.8 in June 2022.
A PMI reading above 50 indicates improved business conditions, while a reading below 50 shows the opposite.
The year-on-year decline in production was mainly driven by the slower annual increase in food production, with an annual increase of 0.6%, compared to 13.1% in the previous month.
Also, slower growth in factory activity contributed to slower annual increases in output of computer, electronic and optical products at 4.2% from 13.2% in July, and of coke and refined petroleum products at 15.5%. % compared to 20.4%.
Of the 19 industrial divisions, 13 posted year-on-year increases in August, led by coke and refined petroleum products; beverages (12.8% of 12.2%); and computer, electronic and optical products (4.2% from 13.2%).
Meanwhile, six industrial divisions posted annual declines, especially in base metal production: 3.2% in August, compared with a 9.4% decline in July. Chemicals and chemical products fell 3.6% and other production, repair and installation of machinery and equipment fell 10.3%.
August’s capacity utilization rate, or the extent to which industrial resources are used in the production of goods, averaged 75.5%, down from 75.7% in July.
All industrial divisions reported an occupancy rate of more than 60% during the month.
The three largest industrial divisions with the highest utilization rates were textile production (82.2%), non-metallic mineral products (82%) and production of machinery and equipment other than electrical (82%).
The sluggish factory activity in August was due to the lagged effects of inflation and supply chain constraints in recent months, Paolo R. Rivera, a research fellow at the Philippine Institute for Development Studies, said in a Viber message.
“Low demand due to inflation could also explain this, as could the prevailing unemployment at the time, which limited production,” he added.
Inflation averaged 3.6% at the end of August. Manufacturing slowed in August due to typhoons and the impact of the phantom months on consumer behavior, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.
Slower growth in the US and China, two of the Philippines’ top trading partners, also affected factory activity, he added.
The Philippine central bank’s 25 basis point cut in August, which is expected to be followed by a series of rate cuts this quarter, could help lower manufacturers’ borrowing and financing costs, Ricafort said.
BSP Governor Eli M. Remolona Jr. said last week that the Monetary Council could implement a 25 bp interest rate cut during its two remaining meetings this year.