Factory output growth slows to nine-month low

Growth in factory output moderated to a nine-month low in September, the government reported on Friday, results economists said were reflective of a slowdown in economic activity.

Industry officials, meanwhile, attributed the weaker factory output to manufacturers already completing inventories.

The National Statistics Office’s (NSO) Monthly Integrated Survey of Selected Industries showed factory output, as measured by the volume of production index (VoPI), up by 15.9 % in September, the slowest since December last year.

In December 2009 the index rose by 12.2%.

Still, the September figure was a reversal from the 9.7 % slump recorded the same month a year ago.

“The general economy slowed down in the third quarter,” said Victor A. Abola, economist at the University of Asia and the Pacific (UA&P), noting that domestic demand eased during the period.

The economy grew by 6.5% in July-September, weighed down by restrained state spending and a protracted dry spell. While the government has claimed consumer and investor confidence remained strong, data released on Wednesday showed growth in personal consumption expenditure slowed to an annual 4.2% in the third quarter from 4.6% in the April to June period.

As for the other indicators of domestic demand, government spending fell by 6.1% year-on-year, while investments eased to an annual 8.9%.

Rolando T. Dy, a UA&P economist and director of the Center for Food and Agribusiness, said factory output moderated due to “low-base effects” aside from the economic slowdown.

“The slowdown is expected, because the peak of the production period is around August or quarters just right before the Christmas season,” Mr. Dy said.

Donald G. Dee, vice-chairman and treasurer of the Philippine Chamber of Commerce and Industry (PCCI), agreed, saying: “It is the end of the catch-up period for industries.”

Cid L. Terosa, a senior economist at the UA&P, said September marked the end of the production cycle, with manufacturers already having completed supply ahead of an expected surge in Christmas-related spending.

“Basically, they sell their outputs in the last quarter. They don’t need to produce because they have enough inventory of finished products,” Mr. Terosa added.

Among the 20 major sectors included in the monthly survey, 15 reported increases in production output, with double-digit gains in miscellaneous manufactures (28.6%); electrical machinery (27.4%); transport equipment (26.9%); beverages (19.8%); publishing and printing (17.8%); non-metallic mineral products (15%); machinery except electrical (14.7%); rubber and plastic products (14.5%); and, basic metals and textiles (14.1%).

Average capacity utilization — which measures the rate at which potential output levels is being used — stood at 83.2%. — D. F. M. Falamig, Businessworld