Factory output slumps for 13th straight month
Philippine factory output extended its losing streak to 13 months in March, according to the local statistics agency.
The output as measured by the volume of production index fell by 73.4% year on year in March, worse than the 43.3% drop in February and 20.4% decline a year earlier.
The March drop marked the steepest in seven months.
The index has been on a steady decline since March last year, when President Rodrigo R. Duterte locked down the entire Luzon island to contain a coronavirus pandemic.
The average drop in the first three months of the year averaged 43.6% compared with a 7.9% slump a year earlier.
The Philippine Statistics Authority said five out of 22 industry divisions slumped, offsetting the gains made in other subsectors.
Of the five that contracted, four were in double digits led by the manufacture of coke and refined petroleum products (-97.3%), tobacco products (-45.4%), machinery and equipment except electrical (-39.3%) and basic pharmaceutical products and preparations (-28%).
Capacity use averaged 61% in March, up from 60.4% in February. Of the 22 sectors, 17 had an average capacity use of at least 50%.
The IHS Markit Philippines Manufacturing Purchasing Managers’ Index (PMI), which uses a different set of parameters, posted a 52.2 reading in March, above the neutral 50 mark that separates expansion from contraction. But this was down from 52.5 in February.
“The ongoing lockdowns, partial or otherwise, accompanied by the steep decline in economic activity and demand from the domestic market remains the main reason for the downtrend experienced by the sector,” ING Bank NV Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail.
“On top of the lack of demand, industries are constantly asked to shutter and to reopen whenever the country is moved into and out of community quarantine status, which also complicates the planning and production process for the sector.”
The country has been under various levels of lockdown since mid-March last year to curb COVID-19.
From March 29 to April 11 this year, Metro Manila and the provinces of Bulacan, Cavite, Laguna and Rizal were placed under the strictest quarantine level. These are now under a more relaxed modified enhanced community quarantine until May 14.
“I do not expect a stark pickup in manufacturing activity outside a possible bounce due to base effects,” Mr. Mapa said. “Overall growth momentum is lacking and the Philippine economy continues to hobble down a lower growth trajectory.”
Manufacturing was among the top contributors to economic growth in the past few years based on the national accounts.
The same could be said about the revised 9.6% drop in economic output last year, when the sector caused a 1.83 point drop, second only to a 2-point drop caused by a construction slump. — AMPY