Business

Manufacturing February pick-up likely a blip as lockdown poses danger

April 7, 2020 | 6:28pm

Data from the Philippine Statistics Authority showed manufacturing activity, as measured by Volume of Production Index (VoPI), grew 3% in the second month of the year. That was a reversal from the 9.3% downtick posted a year ago and faster than 0.1% growth registered in January.

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MANILA, Philippines — Local manufacturing bounced back in February, but the recovery could prove to be short-lived as the lockdown of Luzon, which just got extended, forced businesses to close shops, including factories.

The volume of production index— a measure of factory output— rose 3% in February, up from a 5.2% drop the month before and buoyed by a 9.3% contraction same period a year ago, the Philippine Statistics Authority reported on Tuesday.

Average capacity utilization, a gauge of the industry’s capacity to produce, was at 84.6%.

But the positive performance could have easily eased back in March, something the National Economic and Development Authority (NEDA) is already anticipating due to work disruptions brought by the community quarantine.

“We expect that the enhanced community quarantine has weighed heavily on domestic demand on manufacturing products,” Socioeconomic Planning Secretary Ernesto Pernia said in a statement.

Only food and essentials manufacturing were allowed to operate during the Luzon-wide lockdown that started March 17 and is now poised to end on April 30, a far-reaching measure imposed to put the spread of coronavirus disease-2019 (COVID-19) under control.

Even then, factories that have opened are required to limit the number of their employees, with social distancing measures potentially going in the way of work and reducing production.

With the outbreak expected to linger, Pernia, who heads a sub-interagency committee on forward planning during the quarantine, said “strategies” would need to be developed to help the manufacturing sector cope with the outbreak and lessen the economic impact.

“We need a regular review of rules or limitations imposed due to the health crisis,” the NEDA chief said.

“It is crucial to avoid delimiting production and distribution capacity. This is to ensure that there is enough supply of food and other essential since these are vital for the communities affected by COVID-19,” he explained.

Metals, machinery gain; fuel lose

In February, government data showed food manufacturing slightly accelerated by 3.3% year-on-year from 2.7% same period a year ago. Beverages, meanwhile, posted a faster uptick of 16.9%, coming off from a low base of a 2.7% drop.

Among the industry gainers, printing led the overall positive performance with a 38.4% increase in production. It was followed by fabricated metal products (30.3%), machinery (28%) and chemical products (23.8%).

On the flip side, fuel led the losing industries with a decline of 35.6% year-on-year, as lower oil prices and weaker demand dent production. Tobacco and miscellaneous products followed, with a decrease of 29.3% and 23.1%, respectively.

“The (quarantine), due to the COVID-19 epidemic, will have an adverse effect on manufacturing activity. More than 50% of regular manufacturing activities are not allowed,” Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, said in a text message.

“Once the coronavirus spread is controlled, manufacturing will immediately improve and can come back to pre-COVID-19 pandemic levels,” he added.