Factory restart struggles with nothing to bring employees to work

MANILA, Philippines — Factories continued to lack the drive to produce more in July despite the economy getting back to business for a second month, making a return to further contraction likely last month when a brief lockdown was introduced.

Manufacturers’ volume of production index, a measure of factory output, sagged 11.9% year-on-year in July, worse than 8.5% contraction a year ago but slightly better than the 12.5% drop in June, the Philippine Statistics Authority reported on Friday.

“While manufacturing is not yet in the positive territory, the trends of the volume and value of production in the last three months indicate an improvement in the trajectory of economic activity,” Acting Socioeconomic Planning Secretary Karl Kendrick Chua said in a statement.

But Chua’s positive assessment of the future faces uncertainty, at least for the month of August. President Rodrigo Duterte closed down Metro Manila and four other key areas in Calabarzon and Central Luzon for 15 days last month, triggering renewed business disruptions and a shutdown of public transport.

As it is, the lack of jeepneys, buses and tricycles plying meant employees having a hard time getting to work, preventing operations from fully recovering. Some routes had since been reopened, but the dire need for more public transport modes remain as by government estimate, only 35.5% of workers returned to work last June instead of the expected 58.2%.

Lacking workers, factories on average operated at 75.4% of their capacity in July, down slightly from 75.8% the previous month.

“The slight ‘improvement’ in the VOPI (was due to) lockdowns relaxed somewhat and economic activity returning to some form of normalcy,” Nicholas Mapa, senior economist at ING Bank in Manila, said in an e-mail.

“The bounce, however, does not mean we are out of the woods as we are still far from pre-pandemic level of economic activity as we remain in recession, likely for the next two quarters,” Mapa added.

Chua agreed manufacturing activity will remain “subdued” for the year despite broad lockdowns already dismantled. “Sustaining the gradual and calibrated opening of the economy largely depends on the level of community quarantine that would allow businesses to operate and permit workers to remain mobile,” he said.

“To make this possible, safe and a sufficient availability of public transportation can be supported by service contract subsidies if needed,” he added. The much-delayed Bayanihan to Recover As One bill, a pandemic funding measure awaiting Duterte’s signature, allocates subsidies to public transport drivers.

Breaking down the manufacturing report, only three industries grew in July namely petroleum products, which surged fourfold year-on-year, wood products (14%) and chemical products (0.1%).

On the other hand, essential goods like food still struggled to get back to normal despite being exempted from lockdown restrictions, dropping 9.8% annually in July. The pace of decline was worse than the 8.1% drop in June.

Production of beverages, meanwhile, was worse, plummeting 21.4% compared to the previous month’s 22.7% contraction, figures showed.

Overall, transport equipment led the pack of losers for the month, sinking 58.5% on-year.