Local factories go into 3-month growth streak, but ECQ a threat

MANILA, Philippines — Local factories were on a roll in June, as they posted triple-digit output growth for the third straight month mainly due to help from a low base. But new lockdowns meant to curb the spread of Delta variant are posing a big threat to recovery.

What’s new

The Philippine Statistic Authority’s monthly survey of selected industries found that the volume of production index (VoPI), a measure of manufacturing output, grew 453.1% year-on-year in June, outpacing the 263.2% growth in May.

The latest print showed that VoPI is on a three-month streak, continuing a reversal from 13 straight months of contraction that started when harsh pandemic lockdowns were first imposed in March last year.

Why this matters

Among other datasets, economic managers turn to manufacturing output data to check whether the economy is in tip-top shape. If economic activity slows, such as in the pandemic which muted demand, it could compel factories to cut jobs and limit production to save on costs.

What an analyst says

Ruben Carlo Asuncion, chief economist for Unionbank of the Philippines, said the headline grabbing VoPI reading was due to low base from the past year, when crippling lockdowns weighed down on factory production.

While manufacturing output is not yet back to pre-pandemic level, its gradual ascent is boosting recovery hopes. But Asuncion said the re-imposition of enhanced community quarantine — the strictest lockdown there is — in Metro Manila and a few provinces outside the capital this month may derail the nascent rebound.

“Positive growth for manufacturing performance can be expected next month's release since July was characterized by a more open economy not yet bogged down by the Delta variant risk,” he said.

Other figures

• 19 out of 22 industries were in positive territory in June, led by coke and refined petroleum products which grew 2,932.2%.
• More than a quarter of the establishments polled said they were operating at full capacity. Average capacity utilization rate for the entire manufacturing sector expanded by 67.7% in June from 66.6% in the previous month.