Philippine manufacturing on a downtrend in June 2015

The Philippine manufacturing sector continued its downtrend in terms of volume and value in June 2015 due to the sustained decrease in global demand and business interruptions during the rainy season.

The National Economic and Development Authority (NEDA),  however, said business expectations across sectors remain optimistic as household consumption is expected to be strong driven by sustained inflow of remittances and election-related spending that would boost domestic demand and support growth in the manufacturing sector.

The Philippine Statistics Authority (PSA) reported that the manufacturing sector’s volume of production index (VoPI) declined further by 3.6 percent from a 2% drop in May, a complete opposite from last year’s double-digit growth of 12.7 percent for the same month.The value of production index (VaPI) declined by 7.3 percent year-on-year for this period.

“Despite these figures, there is a sustained positive outlook for the construction-related sectors backed by brisk construction activities. This is fueled by the growth of tourism, continued implementation of infrastructure-related government projects, and robust information technology and business process outsourcing,” said Economic Planning Secretary Arsenio Balisacan.

“This will result in additional demand for offices and other facilities, housing spaces, roads and bridges. Furthermore, low
inflation environment and continuous decline in oil prices are expected to keep construction costs at minimal level,” Balisacan added.

For consumer goods, the volume and value of net sales in furniture and fixtures grew by 61.4 and 37.6 percent, respectively, in June 2015.

Similarly, the year-on-year growth for tobacco volume and value of net sales continued to climb at 10.9 and 11.9 percent, respectively.

However, the food sub-sector continued its double-digit year-on-year drop of 12.5 and 12.7 percent in volume and value of production, respectively, suffering from the effects of the declining world milk prices as well as reduced imports from China and ban in Russia.

As for intermediate goods, production and net sales of non-metallic mineral products demonstrated a double-digit year-on-year growth of 28.5 and 24.5 percent in volume and 18.7 and 14.9 percent in June 2015, respectively. The growth in this sub-sector is owed to the increasing demand from infrastructure-related government projects and the growing tourism, information technology and business process outsourcing industry.

For capital goods, the collective double-digit year-on-year growth of net sales value and volume for fabricated materials, machinery, and transport equipment in net sales production cancelled out the steep decline in basic metals. The average capacity utilization is sustained at 83.3 percent.

“We must pursue consistent and responsive policy initiatives for MSMEs to increase their participation in the global value chains and manufacturing activities,” he said.

Balisacan added that the country should invest in cost-effective and climate-smart technology that will reduce the vulnerability of ourlocally-produced products from the seasonal changes in weather conditions.

“The enactment of the Philippine Competition Act and the Foreign Ships Co-Loading Act should be supported by the delivery of necessary infrastructure projects to address the bottlenecks in the logistics and transport systems. Business procedures must be streamlined to encourage new entrants, while existing firms need to be encouraged to
diversify into new product lines and market,” said Balisacan.