Philippines’ factory output growth streak ends

MANILA, Philippines — Local factory output declined for the first time in nearly two years in March, the Philippine Statistics Authority (PSA) reported on Wednesday, as material shortages weighed on production.

However, the contraction in the Volume of Production Index (VoPI), a measure of manufacturing output, was only by 0.8 percent year-on-year, although it reversed 20 straight months of growth, according to results of PSA’s March survey of companies in selected industries.

The volume of finished food products that came out of factories fell by 8.1 percent in March, contributing the most to the decline in the overall VoPI, the PSA said.

Another major drag to the sector’s performance was the manufacture of computer, electronic, and optical products which grew by 5.3 percent, marking a sharp slowdown from the 15.2 percent expansion seen in February.

READ: Material shortages clipped Philippine factory output in March

Meanwhile, the production of coke and refined petroleum products also slowed to 10.2 percent in March, from 22.1 percent seen in the preceding month.

12 out of 19 industries post declines

Of the remaining 19 industries tracked by the PSA, 12 registered declines in March while seven posted increases. Data showed the highest annual growth rate was observed in the manufacture of chemical and chemical products at 29.1 percent.

The latest VoPI reading was consistent with the results of a separate poll by S&P Global, which showed that while the Philippines’ Purchasing Managers’ Index (PMI) was broadly unchanged at 50.9 in March, output contracted for the first time since July 2022 after factories grappled with material shortages.

The PMI is another gauge of the health of the manufacturing sector. S&P said new orders continued to expand in March, although the rate of growth “moderated” from February.

READ: PH manufacturing gauge hits 5-month high

Despite the inadequate supply of materials, companies polled by S&P said their suppliers “moderated” hikes in their charges to boost sales. This, in turn, prompted factories to reduce their selling prices for the first time in nearly four years, although the decline was minimal.

But S&P said local factories are still less upbeat.

Recovery

If advance estimates by S&P are to be believed, recovery could be ahead after the PMI rose to 52.2 in April, the highest in five months. The report attributed the rebound to a quicker rate of expansion in new orders which, in turn, triggered a renewed and solid rise in production.

Additionally, demand from overseas markets also expanded at a stronger rate, S&P said.

According to the PSA, the average growth of VoPI stood at 3 percent in the first quarter of 2024, lower than the 6 percent expansion recorded in the comparable period last year.