Low base prompts 3-digit rise in factory output

by Louise Maureen Simeon (The Philippine Star), 9 Jul 2021

MANILA, Philippines — The country’s manufacturing output posted a massive rebound in May largely due to low base effects, supported by the easing of quarantine restrictions which saw most industry groups recording significant gains.

Factory output, measured by the Volume of Production Index (VoPI), surged by 265 percent in May, coming from a 156 percent growth in April and 73 percent decline in May 2020.

The Philippine Statistics Authority (PSA) attributed the faster upturn in VoPI to the growth of 18 industry divisions led by the manufacture of coke and refined petroleum products, which swelled more than 1,300 percent.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the triple-digit sharp increase in manufacturing was magnified by the gradual reopening of the economy with the downgrade of quarantine classification in mid-May.

This is on top of the low base from a year ago when manufacturing industries were forced to shut down or drastically reduce operating capacities.

Such a massive growth is also consistent with the surge in exports and imports as both the domestic and global economy start to recover from the pandemic.

“The resumption of the refinery operations of Petron since June after four months of shutdown will also add to the growth in manufacturing activities,” Ricafort said.

However, Ricafort said such a trend would only last until August when base effect is still low and growth would eventually taper off by September.

Eighteen out of the 22 industry groups covered by the index registered growth during the month led by the manufacture of coke and refined petroleum products at 1,366.1 percent.

Most industry groups also posted triple-digit gains including wood, bamboo, cane, rattan articles and related products (301 percent), fabricated metal products except machinery and equipment (276 percent), leather products (156 percent), basic metals (138 percent), transport equipment (130 percent), wearing apparel (127 percent), furniture (119 percent) and non-metallic mineral products (103 percent).

Other huge gainers also include computer, electronic and optical products, installation of machinery and equipment, electrical equipment, rubber and plastic products, paper and paper products, machinery and equipment except electrical, textiles, food products and beverages.

Contractions, meanwhile, were recorded in tobacco products at 69 percent, printing and reproduction of recorded media at 44 percent, chemical products and basic pharmaceutical products and preparations, both at three percent.

The Value of Production Index (VaPI) likewise recorded a massive rebound of 250 percent in May from 145.5 percent growth in April and 74.4 percent contraction in May 2020.

Further, capacity utilization on the average rose to 66.1 percent from 64 percent the month before.

Eighteen of the 22 industry groups had at least 50 percent average capacity utilization rate, led by furniture, manufacture of other non-metallic mineral products, and machinery and equipment except electrical.

Only 20 percent of responding establishments operated at full capacity.