Factory output eases to 1-year low in June

Manufacturing output eased in June to its slowest in a year, mainly due to the contraction in the manufacturing of food products and beverages, the Philippine Statistics Authority (PSA) reported on Tuesday.

Preliminary results of the PSA’s latest Monthly Integrated Survey of Selected Industries showed factory output, as measured by the volume of production index, rose by 3.4% year on year in June.

However, this was slower than the revised 7.7% in May, and matched the pace in March. It was also the slowest growth in 12 months or since the 0.04% decline in June last year.

On a monthly basis, June’s output contracted by 3.5%. Stripping out seasonality factors, manufacturing for that month slipped by 2.1%, a reversal of the 2.4% growth in May.

Year to date, factory output growth averaged 5.9%, decelerating from the 28.1% growth in the same six-month period in 2022.

According to the PSA, the manufacturing slowdown in June was mainly due to the sharp annual declines in the top three industry divisions: food products (-3.2% from 6.9% in May), fabricated mineral products, except machinery and equipment (-36.4% from 2.9%), and beverages (-7.7% from 4.8%).

Ten other divisions posted slower growth, while the remaining nine saw expansion.

This slowdown was reflected in the S&P Global Philippines Manufacturing Purchasing Managers’ Index, which eased to 50.9 reading in June — the slowest expansion in 11 months. A reading above 50 separates expansion from contraction.

Nicholas Antonio T. Mapa, senior economist at ING Bank N.V. Manila, said he expects manufacturing to continue expanding for the rest of the year.

“Potential headwinds to the agricultural sector (storm damage and El Niño) could have a negative impact on manufacturing, however,” he said in an e-mail.

Philippine Exporters Confederation, Inc. President Sergio R. Ortiz-Luis, Jr. said in a Viber interview that the manufacturing sector’s performance could have affected second-quarter gross domestic product (GDP) growth.

Manufacturing historically accounts for about 20% of the country’s GDP.

“The positive but less pronounced pickup in manufacturing moves in line with our expectation for a slowdown in the second quarter from the 6.4% pace of growth in the first quarter,” Mr. Mapa said.

A BusinessWorld poll yielded a median estimate of 6% GDP growth for the second quarter. If realized, this would be easing from the 6.4% print in the first three months of the year and the 7.5% growth a year ago.

The PSA will release the second-quarter GDP data on Thursday (Aug. 10). — Lourdes O. Pilar