PH factory gate prices continue slide

MANILA  -Local factory gate prices contracted for the second straight month in October as easing inflation helped relieve input costs, which allowed manufacturers to make their selling prices more affordable to clients.

The producer price index (PPI), a measure of local factory gate prices, fell 0.3 percent year-on-year in October, a faster decline than the 0.2 percent dip in September, the Philippine Statistics Authority (PSA) said in a report.

On a month-on-month basis, factory gate prices grew by a measly 0.01 percent.

The latest reading was consistent with the results of a survey by S&P Global, which showed that Philippine factory gate charges “rose only modestly and at a less pronounced rate” in October compared to September.

In its report released in early November, S&P said the pace of input price inflation was the slowest in four months in October and below the historical average. This, despite companies reporting “greater raw material and energy costs” that bloated operating expenses during the month.

Government data showed inflation cooled for the first time in three months in October to 4.9 percent, with rice posting a milder price growth after being the main driver of resurgent inflation back in September.

READ: PH inflation eased to 4.9% in Oct

Michael Enriquez, president of Sun Life Investment Management and Trust Corp., said factory gate prices tracked an overall slowdown in commodity prices, adding that the government must immediately arrest supply side price pressures fueling stubbornly high inflation.

“Commodity prices have been going down from its peak,” Enriquez said.

Demand drop?

But with inflation still above the government’s 2 to 4 percent target range, Leonardo Lanzona, economist at Ateneo de Manila University, said the decline in factory gate charges could be a symptom of weakening demand for local products as rising cost of living continued to crimp household budgets.

“I think the decline in consumer demand has contributed to slow factory production. The private sector investment has decelerated in the last quarter,” Lanzona said.

READ: Household spending showing signs of recovery, says Pantheon

Broken down, the faster decline in PPI in October was mainly due to slower annual increase in factory gate prices of food products at 0.4 percent, from 1.4 percent in the preceding month. Food products—responsible for 62.2 percent of quicker decline in overall factory gate prices in October—have the highest weight in the computation of PPI.

Other main contributors to the price slump during the months were coke and refined petroleum products, as well as fabricated metal products.