Manufacturing sector rebound PSA says output expands by 534.6% in August photo from Business Mirror
Philippine Economy

Manufacturing sector rebound? PSA says output expands by 534.6% in August

Oct 8, 2021, 5:43 AM
Rose De La Cruz

Rose De La Cruz


The government, through Philippine Statistics Authority, claimed that August production of factories grew heftily at 534.6 percent though an earlier report by a private market intelligence firm IHS Markit said the Philippines’ headline purchasing managers’ index (PMI) fell sharply to 46.4 in August from 50.4 in July.

THE Philippine Statistics Authority claimed that factory output expanded robustly to triple digit in August or by 534.6 percent.

Yet, an earlier (Sept. 2) report of the Star showed that the country’s manufacturing sector went back into contraction mode in August, posting its lowest output in 15 months, as the surge in cases due to the Delta variant prompted the reimposition of strict lockdown measures.

The PSA said it based its report on the Production Index and Net Sales Index or the Monthly Integrated Survey of manufacturing firms in the country.

This is the fifth consecutive month that the Volume of Production Index (VoPI)posted triple-digit growth this year.

However, the growth in August was slightly lower than the 539.7-percent growth recorded in July.

Growth contributors

“Sixteen industry divisions contributed to the positive growth of VoPI in August 2021, of which the fastest growth was reported in manufacture of coke and refined petroleum products at 3,800.9 percent,” the PSA noted.

Data also showed this was followed by the manufacture of fabricated metal products, except machinery and equipment which posted growth of 194.2 percent in August and the manufacture of wood, bamboo, cane, rattan articles and related products, which grew 94 percent during the period.


However, six industry divisions recorded decreases with the manufacture of tobacco products registering the deepest contraction of 53.8 percent (from higher taxes).

“This was the second-highest annual growth rate in the 2018-based data series of VaPI after hitting its highest annual increase in the previous month at 528.7 percent,” PSA said.

Triple-digit growth

Meanwhile, the Value of Production Index (VaPI) for manufacturing also showed triple-digit growth of 523.3 percent in August 2021.

The PSA said this was largely due to the increases recorded in 14 out of 22 industry divisions. These divisions were led by the manufacture of coke and refined petroleum products, which posted growth of 4,388.7 percent.

The PSA said the remaining eight industry divisions recorded decreases, with the manufacture of tobacco products posting the deepest contraction of 53.8 percent during the period.

Meanwhile, PSA said the average capacity utilization rate for manufacturing slightly decreased in August 2021.

“Based on responding establishments, the average capacity utilization rate for the manufacturing sector in August 2021 dropped to 66.1 percent from 66.8 percent in the previous month,” PSA said.

The data showed 19 out of 22 industry divisions with more than 50-percent average capacity utilization rate.

This was led by the manufacture of furniture at 83.1 percent; manufacture of tobacco products, 81.6 percent; and manufacture of other non-metallic mineral products, 79.3 percent.

The MISSI is now termed the Production Index and Net Sales Index. It is a report that monitors the production, net sales, inventories, and capacity utilization of selected manufacturing establishments to provide flash indicators on the performance of the manufacturing sector.

A different view

Market intelligence firm IHS Markit said the Philippines’ headline purchasing managers’ index (PMI) fell sharply to 46.4 in August from 50.4 in July, the Star reported earlier.

The August headline index slid way below the neutral 50 mark that separates expansion from contraction.

The latest reading is the first contraction after three months of growth and the lowest recorded since 40.1 in May 2020.

The headline PMI provides a quick overview of the health of the manufacturing sector based on the weighted average of five indicators: new orders (30 percent weight), output (25 percent), job creation (20 percent), supplier delivery times (15 percent) and inventories (10 percent).

3rd round of ECQ

IHS Markit’s latest reading revealed the impact of the third round of the enhanced community quarantine in Metro Manila and nearby economic hubs that led to factory and business closures.

The more transmissible Delta variant continues to spread, with daily cases reaching a new record high of over 22,000 on Monday.

“The latest contraction in operating conditions in the Philippine manufacturing sector came as no surprise. Factories and their clients in Metro Manila once again paused their production lines in a bid to curb the spread of the new Delta variant,” IHS Markit economist Shreeya Patel said.

Output and new orders fell sharply, although the rates of decline were not as severe as those seen during the first ECQ last year.

Production volumes fell for the fifth month in a row while customer demand dipped as tighter restrictions on travel and the closure of businesses led clients to limit orders.

Production levels and new orders at the domestic front are still on a decline, while those from overseas markets returned to contraction after three months of increase.

Further, IHS Markit noted that firms continue to scale back on their hiring efforts, leading to the 18th consecutive month of contraction in employment largely due to factory shutdowns as well as relatively weak demand environment.

There was also a sharp decline in purchasing activity as businesses looked to recover costs and restructure stocks in line with weak demand. Both pre and post- production inventories fell, albeit moderately.

Another downside is that pressure remained on the supply chain due to tighter measures, port congestions and shortages that lengthened delivery times from suppliers, the worst since August of last year.

Materials shortages and delivery delays continue to result in higher input prices, with costs rising for 16 months now. This prompted firms to raise the prices of their products to pass on some of the cost burdens to customers.

With this, firms’ optimism about their overall prospects for higher production levels in the next 12 months fell to a four-month low in August though still firmly in the positive territory.

“Firms’ expectations toward the outlook remained optimistic owing to hopes that the latest downturn is only temporary. Looking at prices, easing input costs suggests that the sharp price pressures seen since the start of the year are starting to ease,” Patel said.

“As with all regions, vaccinations remain paramount to controlling the spread of the disease and the associated variants. Firms will hope shocks to the supply of vaccines are brought under control to prevent this being pushed back again,” she said.

Tags: #manufacturingoutput, #volumeandvalueupbythreedigits, #PSA, #IHSMarkit, #economy

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