Factory output drops for 7th straight month in June

Neda chief Ernesto Pernia. INQUIRER file photo / JOAN BONDOC

MANILA, Philippines–The year-on-year decline in monthly factory output continued for the seventh straight month in June, and the country’s chief economist sees no immediate respite in sight amid slowing global demand.

The Philippine Statistics Authority’s (PSA) Monthly Integrated Survey of Selected Industries (Missi) report for June showed that the Volume of Production Index (VoPI) contracted 10.5 percent last June, reversing the 9.8-percent growth posted a year ago.

PSA data showed that the VoPI—a proxy for manufacturing output—had been shrinking since December 2018.

The PSA attributed June’s VoPI downtrend to “annual decreases observed in 11 major industry groups led by the [commodities] with two-digit negative annual rates, as follows: petroleum products (down 69.3 percent), furniture and fixtures (down 40.5 percent), and basic metals (down 18.3 percent).”

The latest preliminary PSA data also showed that the Value of Production Index (VaPI) dropped 9.6 percent in June, a reversal of the 10.9-percent jump in the value of locally manufactured goods during the same month last year.

“Manufacturing output will likely remain muted in the near term as business and consumer outlook for the third quarter of 2019 turned less upbeat,” Socioeconomic Planning Secretary Ernesto M. Pernia said in a statement.

“Production could be stifled as the seasonal slack in domestic demand and business activities during the rainy season limits overall manufacturing growth,” added Pernia, who heads the state planning agency National Economic and Development Authority (Neda).

As such, Pernia said “we need to instill a sense of urgency in government to implement economic reforms.”

The Neda chief was nonetheless optimistic about easing inflation and the mild dry spell due to El Niño, which would augur well to domestic production in the near term.

“Moving forward, domestic demand expansion is needed to support the growth of manufacturing, especially given the slowdown in global demand. The now markedly slower inflation rate, which is back to government’s target range, bodes well for producers of manufactured goods,” Pernia said.

“We need to also accelerate public works spending during the second semester of 2019, which will contribute to increases in employment and disposable incomes, thus raising the demand for consumer goods,” the Neda chief added.

The government is implementing a spending catch-up plan, under which major infrastructure agencies would speed up implementation of P803-billion worth of projects for the rest of this year in a bid to reverse slow economic growth during the first quarter due to underspending on public goods and services amid a budget impasse in Congress. /jpv