Written by Abigail Marie P. Yraola, a researcher.
The Philippine Statistics Authority (PSA) reported on Friday that factory production grew by 8.5% in August, marking its quickest rate this year and showing a higher increase compared to the previous year.
According to the initial findings from the Monthly Integrated Survey of Selected Industries (MISSI), manufacturing production, as measured by the volume of production index (VoPI), rose to its highest level in seven months in August. This was an increase from the 4.6% growth recorded in the same month last year.
The data shows a faster rate of growth in comparison to the 4.9% growth seen in July. This was the most rapid growth seen in the past seven months, since the 8.6% growth recorded in January.
The manufacturing industry’s VoPI (Value of Production Index) rose by 4% in August, slightly higher than the 3.8% growth in the previous month. After accounting for seasonal changes, the VoPI grew at a slower rate of 2.7%, compared to the 3% growth in July.
In August, the average factory output growth for the year thus far was 5.8%, significantly lower than the average growth of 21.1% observed during the same period in 2022.
According to a message sent through Viber by Robert Dan J. Roces, the chief economist of Security Bank Corp., the increase observed in August is likely a result of improved demand and potential enhancements in the operations of the manufacturing industry.
According to him, the average increase is 5.8%, significantly lower than the 21.1% seen in 2022. He pointed out that this could be due to factors such as base effects, reduced trade, and inflation.
The average increase in consumer prices in 2022 was 5.8%, surpassing the 2-4% goal set by the Bangko Sentral ng Pilipinas (BSP).
In reaction to the increasing inflation, the central bank raised interest rates by a total of 425 basis points from May 2022 to March, resulting in a key rate of 6.25%, the highest in 16 years.
In 2022, the trade balance had a deficit of $58.24 billion, which was the highest amount recorded since 1991, the earliest year for which this data is accessible.
In 2022, the total worth of goods being sold to other countries was $78.98 billion, while the amount of goods being purchased from other countries was $137.22 billion.
According to Domini S. Velasquez, the head economist at China Banking Corp., the significant increase in VoPI is a positive sign for the economy.
In a separate message on Viber, she stated that the manufacturing industry stayed strong despite the increase in minimum wage in NCR and Calabarzon.
She went on to clarify that the manufacturing industry in Asia is experiencing a small recovery, as evidenced by China’s first growth since April of this year.
Ms. Velasquez stated that if the current trend persists, it is anticipated that the domestic manufacturing industry will experience gradual growth despite the rise in interest rates.
The NCR Tripartite Wages and Productivity Board has granted a P40 raise in the daily minimum wage for Metro Manila, effective on July 16.
The daily minimum wage for non-agricultural workers is now P610, while those in the agriculture sector, service retail establishments with 15 or fewer employees, and manufacturing companies with less than 10 employees will receive P573.
The Cagayan Valley Regional Tripartite Wages and Productivity Board granted a P30 raise in September, to be distributed in two installments. This raised the daily minimum wage for non-agricultural workers to P450 and for agricultural workers to P430.
The wage board for Central Luzon has approved a P40 raise for nonagricultural, agricultural, and retail service businesses. In the SOCCSKSARGEN region, a P35 increase in daily wages has been approved and will be distributed in two stages.
In contrast to the increase in VoPI, the manufacturing PMI for August was 49.7%, indicating that the PMI has dropped below 50 for the first time in two years.
The PMI serves as a predictor for upcoming manufacturing activity by indicating anticipated demand for raw materials, which will be utilized by factories in the coming months.
An index value above 50 signifies growth in predicted manufacturing operations, whereas a value below 50 indicates a decline in operating circumstances.
The bureau of statistics reported that three sectors were the main contributors to the accelerated growth in August. The leading industry was coke and refined petroleum, with an increase from 35.6% in July to 48%.
The food industry experienced a 0.7% increase in growth, a significant improvement from the 3.4% decrease in July. Additionally, the yearly decrease in the production of computer, electronic, and optical products decreased at a slower rate of 5.2%, compared to the 17% decline in July.
Furthermore, the PSA stated that although seven other sectors within the industry saw growth over the year, 12 categories experienced decreases. This includes furniture manufacturing, which had the biggest annual decrease of 31.9% compared to the 36.9% decline in July.
In August, the machinery and equipment industry, excluding electrical items, saw a steeper decrease of 29.3% compared to a 16.8% decline in July. Similarly, the wearing apparel sector experienced a decline of 16.7%, more significant than the 23.1% decrease in the previous month.
In August, the average utilization of capacity was 73.9%, slightly higher than the revised rate of 73.6% in July. This number was also greater than the 71.5% recorded in August of the previous year.
During the designated time frame, the statistics agency reported that every sector within the industry reached a utilization rate of over 50%.
According to Mr. Roces, the positive results in August indicate a promising future for factory production in the near term. However, external factors such as supply chain problems and trade policies will have a significant impact on the industry’s overall well-being for the rest of the year.