Factory output slump in February worst in 5 months

MANILA, Philippines — Local factories worsened their output slump in February and the re-imposition of tighter lockdowns in key economic areas could further complicate recovery for the manufacturing sector.

What's new

The volume of production index (VoPI), a measure of manufacturing output, collapsed at a faster rate of 43.6% year-on-year in February compared to 12% contraction in January, results of the Philippine Statistics Authority's monthly survey of selected industries showed Thursday.

Why this matters

The February figure was VoPI's worst reading in 5 months, a sign that factories could still be struggling to achieve a sustainable rebound even as coronavirus restrictions have been eased since June last year. In fact, PSA data showed average capacity utilization, a gauge of the industry's capacity to produce, fell to 53.8% in February from 56.7% in the previous month.

The future looks brighter though if IHS Markit, a British information provider, is to be believed. The firm said factories should have gone back to expansion mode in February and sustain that momentum in March, although fresh restrictions in Metro Manila and four surrounding urban areas to arrest a renewed surge in coronavirus infections threaten to block that path.

What analyst says

Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines, believes a “lag” in data collection likely caused the contrasting reports of IHS Markit and PSA.

"I am hoping that this is now the bottom," Asuncion said in a text message when sought for comment on the PSA's report. "But then again, we cannot be dismissive of the fact that demand is still recovering and may again take a slight hit with recent movement restrictions enforced by the government to curb Covid-19’s latest surge"

Other figures

• Only four industries posted growth in February led by fabricated metal products which expanded 18.7% on year. This was followed by electrical equipment (11.2%) and paper products (2.6%).
• Companies manufacturing coke and refined petroleum products were the biggest losers during the month, with output coming out of these plants plummeting 85.4% year-on-year.