June manufacturing output down 4.3%

Manufacturing performance remained sluggish in June as the National Statistics Office (NSO) reported a 4.3-percent year-on-year drop in the volume of production index (VoPI) due to significant price adjustments as a result of the expanded value added tax (EVAT), global oil price hikes and the wage increase during the semester.

Major sectors with significant reduction in factory output were machinery, excluding electrical, electrical machinery, tobacco, wood and wood products, footwear and wearing apparel, tansport equipment and rubber products.

On a month-on-month basis, however, VoPI reflected a slight increase of 0.3 percent in June due to the increases posted by 12 major sectors led by beverages and paper and paper products.

"Nevertheless, notable industries continued to pose strong sales such as basic metals, leather products, electrical machinery, fabricated metal products and food manufacturing, among others," National Planning and Policy Staff chief Dennis M. Arroyo said yesterday.

In terms of value, the industry’s value of production index (VaPI) went up by 9.6 percent compared to year-ago levels and slightly higher than the 8.3 percent growth recorded in the previous month.

Arroyo noted that the performance of the first half points to the resilience of the manufacturing industry.

"The results yield less rapid first semester year-on-year increase of 7.7 percent in value of production and 7.8 percent in value of net sales compared to 11.1 percent and 8.2 percent, respectively in the same period in 2005 amidst significant price adjustments due to the E-VAT and global oil price hikes, and the wage increase during the semester. Nonetheless, the resilience of the manufacturing sector points to brighter prospects for the rest of the year particularly of the industries covered by the survey, which are mostly large industries," he said.

"The marked improvement in the overall value of production in June 2006 came from eleven out of twenty industries, namely, leather products (53.6 percent), basic metals (52.6 percent), petroleum products (32.7 percent), fabricated metal products (20.4 percent), food manufacturing (15.2 percent), beverages (13.8 percent), textiles (12.3 percent), paper and paper products (9.7 percent), fabricated non-metallic mineral products (7.1 percent), electrical machinery (3.8 percent), and miscellaneous manufactures (8.1 percent). Noteworthy is the strong performance of the petroleum industry, which is expected to be sustained in the long-term given the encouraging rise in demand for Philippine petroleum products in the region," Arroyo said, citing preliminary figures from the NSO.

The NSO also reported that value of sales decelerated to 3.8 percent compared to the previous year, as a result of the double-digit decline in some industries.

Average capacity utilization as of June slightly improved to 80.3 percent compared to 80.1 percent registered in the same period last year.