Manufacturing growth cools in Dec.
FACTORY PRODUCTION grew at its slowest pace in three months in December due to seasonal factors and a decline in trade performance, economists said.
Preliminary results of the Philippine Statistics Authority’s (PSA) Monthly Integrated Survey of Selected Industries (MISSI) showed manufacturing, as measured by the volume of production index (VoPI), expanded by 4.8% year on year in December.
December growth slowed from the revised 5.9% in November and 19.2% last year. It also marked the slowest uptick since 4.6% in September last year.
The latest print brought last year’s average factory output growth to 15.2%, easing from the 52.6% average in 2021.
Robert Dan J. Roces, chief economist at Security Bank Corp., said in an e-mail that December is usually a slow month for many industries so factory orders may have dropped.
“This slowdown may have come from the easing of trade last December. The same month’s PMI reading, nevertheless, continue to point to expansion, but the robust domestic demand is the biggest reason for the better performance,” Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, Inc. (UnionBank), said in an e-mail.
S&P Global’s Philippines Manufacturing Purchasing Managers’ Index (PMI) hit a six-month high in December, indicating a solid improvement in the health of the manufacturing sector.
The country’s trade deficit widened in December from the previous month as exports declined to its lowest in more than two years while imports continued to fall.
PSA data showed the value of merchandise exports dropped by 9.7% year on year to $5.67 billion in December while imports slid 9.9% to a 23-month low of $10.26 billion.
Three industry divisions contributed to the slower growth in December, the PSA said in the report released on Thursday.
Manufacture of computer, electronic and optical products grew by 21.3% in December from 25.8% in November. Transport equipment contracted by 1%, a reversal from the previous month’s 14.3% growth.
Basic metals saw a deeper contraction (-37.5% from -29.2%).
On the other hand, the PSA said eight industry divisions recorded higher annual growth, led by fabricated metal products, except machinery and equipment (52.9% from 33.9%) and chemical and chemical products (42.7% from 25%).
“The economy was still in the process of recovering from the impact of the COVID-19 (coronavirus disease 2019) pandemic in 2020 and 2021, leading to an increase in demand for manufactured goods and an acceleration in production, such as revenge spending,” Mr. Roces said.
As the economy saw a sustained recovery last year, he noted growth may “naturally slow down” this year.
“Note though, that 2022 demand was still largely revenge spending driven, so we can say that the VoPI in 2022 may already have been back to a pre-pandemic volume, thus, a slower rate of change,” Mr. Roces said.
Federation of Philippine Industries’ Chairman Jesus L. Arranza said the December slowdown may be attributed to the weather disturbances that hampered production and delivery.
“In December, factories are almost at a standstill. Everyone is busy (with holiday parties),” he said in a phone interview.
December’s capacity utilization — the extent to which industry resources are used in producing goods — averaged 71.6%, slower than the revised 72.6% in November. However, it is higher than the 67.5% posted in December 2021.
Nineteen out of 22 industries reached an average capacity utilization rate of more than 60%.
Mr. Asuncion said this year will be challenging for the manufacturing sector amid a potential global economic slowdown.
“Our recent reading of upbeat and resilient domestic demand continues and consequently provides support for manufacturing output growth,” he said.
Mr. Roces said manufacturing sector may see continued growth this year as global economy continues to recover and demand remains strong.
“However, this remains sensitive to any potential supply chain disruptions or changes in government policies as well as geopolitical events,” he added. — Abigail Marie P. Yraola