Higher prices and work disruptions, such as typhoons, could slowdown the country’s manufacturing output in the fourth quarter, according to the National Economic and Development Authority (Neda).
In a news statement issued on Tuesday, Neda Officer in Charge (OIC) Undersecretary for Investment Programming Rolando G. Tungpalan said, however, that manufacturing output growth expectations remain positive in the October-to-December period.
The statement came on the heels of the data released by the Philippine Statistics Authority (PSA), which showed the Volume of Production Index (VoPI) growth slowed to 2.8 percent in August 2017, from 13.3 percent in August 2016.
“Short-term upward inflationary pressures, such as increase in global oil prices, as well as price increases in fish, corn, vegetables, flour and other cereal products, may affect cost of production. Typhoon occurrences may also interrupt business activities, resulting in lower manufacturing output,” Tungpalan said.
He added the factors that would pull up factory production in the last quarter of the year include construction products that could increase the demand for construction-related products.
These products, Tungpalan said, have already boost the growth in VoPI in August. The production of basic metals, fabricated metal products and nonmetallic mineral products continues to increase at 28.5 percent, 89.5 percent and 18.7 percent, respectively.
These are linked to the government’s flagship projects and the “Build, Build, Build” program, wherein the government is expected to increase its spending for various infrastructure projects.
“Sustained infrastructure development, translating to increase in public construction expenditure, is anticipated not only to increase the growth of the manufacturing sector, but also to support the continuous growth of the economy,” he said.
Apart from the Duterte administration’s huge infrastructure push, Tungpalan said higher exports are also expected to contribute to growth in the VoPI.
The manufacture of export-oriented products, he added, have already contributed to boosting VoPI growth in August.
Tungpalan cited PSA data, which showed furniture and fixtures, as well as leather products, posted double-digit growths of 35.6 percent and 21.9 percent in August 2017, respectively.
“The local production capacity and efficiency of construction-related manufacturers must be expanded to support our initiative of massive spending in infrastructure programs and projects,” Tungpalan said.
Meanwhile, the PSA’s Monthly Integrated Survey of Selected Industries (Missi), showed the VoPI growth in August was a significant improvement from the 3.5-percent decline posted in July 2017.
The PSA data also showed the manufacturing sector’s Value of Production Index (VaPI) increased by 2.4 percent from a 2-percent contraction in July.
Neda noted that the three-month moving average for both indexes remained in the positive territory at 0.2 percent for the VoPI and 1.7 percent for the VaPI.
The PSA added that the average capacity utilization rate in August 2017 is 83.8 percent, with petroleum products posting the highest among industries.
Data showed the average capacity utilization rate in August 2017 for total manufacturing was recorded at 83.8 percent. Around 55 percent, or 11, of the 20 major industries operated at 80 percent and above capacity utilization rates.
“The proportion of establishments that operated at full capacity [90 percent to 100 percent] was recorded at more than one-fourth of the total number of establishments [26.8 percent] in August 2017. About 53.8 percent of the total establishments operated at 70-percent to 89-percent capacity, while almost one-fifth of the total establishments [19.4 percent] operated below 70 percent capacity,” the PSA said.
Tungpalan is currently the OIC of the Neda while Socioeconomic Planning Secretary Ernesto M. Pernia is on official travel abroad.
Missi is a report that monitors the production, net sales, inventories and capacity utilization of selected manufacturing establishments to provide flash indicators on the performance of the manufacturing sector.