Philippine factory output slows in September as inflation bites

MANILA, Philippines — Local factories crumbled under the weight of inflation in September as production slowed down amid rising input prices. 

Results of the Philippine Statistics Authority’s monthly survey of selected industries revealed the volume of production index (VoPI), a measure of manufacturing output, rose 2.4% year-on-year in September, lower compared to the 4.4% expansion recorded in August.

This was the 16th straight month that VoPI expanded.

Economic managers look to manufacturing output as a barometer of economic welfare as it can be an indicator of demand situation in the country, where consumer spending is a major growth driver.

When factories churn more finished products, this could be a sign of strong consumer demand. When demand is robust, manufacturers tend to hire more workers to avoid backlogs which, in turn, generates employment for the country.

Analysts expect the local manufacturing sector to endure high input prices in the coming months, considering inflation has yet to peak. Inflation has been accelerating in past months due in part to supply chain disruptions, resurgent consumer demand, expensive fuel price and a weak peso. 

In September, local factory output continued to shed outsized base effects, which the sector benefitted from as the result of monthslong slumps as a result of pandemic fallout.

Data broken down showed that 13 industries expanded in September, led by manufacture of machinery and equipment except electrical, growing at a pace of 90% year-on-year. 

On the other hand, nine industries led by the manufacture of electrical equipment, posting its fastest annual drop at 54.7%, saw output shrink in the same month.

More than one-fifth of factories were operating at full capacity, as average capacity utilization inched up 71.5% from 71.4% in August.