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Factory output growth slows in May

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Factory output growth slows in May

By means of Lourdes O. Pilar, Researcher

PRODUCT GROWTH OF MANUFACTURING Growth slowed in May as production of computer, chemical and metal products fell, the Philippine Statistics Authority (PSA) said on Tuesday.

Preliminary results from the PSA’s latest Monthly Integrated Survey of Selected Industries showed that factory output, as measured by the Volume of Production Index (VoPI), grew by 3.2% year-on-year in May.

However, output growth in May slowed from a revised 6.3% in April and 6.1% in the same month a year ago.

It was also the slowest pace of growth in two months since March’s revised 5.5% decline.

On a monthly basis, the manufacturing VoPI rose 1.5% in May, compared to the 1.1% decline in April. Excluding seasonal factors, factory production fell by 0.03% that month.

Over the period January to May, factory production growth averaged 0.9%FIt’s clearly a slowdown from 6.3% a year ago.

In comparison, the S&P Global Philippines Manufacturing Purchasing Managers’ Index stood at 54.1 in May, down slightly from 54.3 in April. A figure above 50 indicates improvement for the manufacturing sector, while anything below indicates deterioration.

Ser Percival K. Peña-Reyes, director of the Ateneo de Manila University Center for Economic Research and Development, said in a telephone interview that output growth slowed in May due to sluggish demand.

“Lethargic demand is still struggling with inflation. Even though it is slowing down, people can still feel it,” he said.

On the supply side, Mr. Peña-Reyes said manufacturers have also faced rising costs, customs and transportation delays.ffic.

“All this contributes to the easing of production. If you imagine the buyer’s supply and demand curves, both shift to the left, production undeniably decreases, but eFThe effect on price is ambiguous,” he added.

John Paolo R. Rivera, senior research fellow at the Philippine Institute for Development Studies, said high inflation and the depreciation of the peso have also contributed to declining industrial production.

“These have contributed to making raw materials and work in progress more expensive, especially those that are imported. The devaluation of the currency makes imported inputs for production more expensive,” Rivera said in an email.

In mid-May, the peso fell to the P58 level per dollar for the first time in 18 months or since November 2022. The peso closed at P58.52 against the dollar at the end of May and fell by P0.94 from it’s P57.58 Fready from the end of April.

Inflation accelerated to a six-month high in May, driven by faster increases in utility and transportation costs. The consumer price index rose to 3.9% year-on-year in May from 3.8% in April, but slowed from 6.1% in the same month last year.

The PSA said the contraction in three leading industrial divisions weighed on total output, namely manufactured products excluding machinery and equipment (-13.4% in May, compared to 29.9% in April); chemical and chemical products (-17.7% compared to 16.6%); and computer, electronic and optical products (-0.3% versus 5.2%).

Fifteen industrial divisions also saw declines in May.

On the other hand, there is the production of coke and fireFIned Petroleum products posted the fastest growth of 53.6%, compared to 18.7% in April.

The average capacity utilization rate – the extent to which industrial resources are used in the production of goods – averaged 75.5% in May. This is slightly higher than 75.3% in the previous month and 73.5% in May 2023.

All industrial divisions recorded an average occupancy rate of at least 60% this month. The production of paper and paper products had the slowest growth at 65%.

“Inflation tends to dampen spending, but when it does, it willFIf the situation improves, production could grow better in June,” said Mr. Peña-Reyes.