Production output in manufacturing declined to a three-month low in June, influenced by reductions in the output of fundamental metals alongside coke and refined petroleum products, according to a report by the Philippine Statistics Authority (PSA).
Initial findings from the PSA’s recent Monthly Integrated Survey of Selected Industries (MISSI) indicated that factory production, quantified by the volume of production index, diminished by 2.2% year-on-year in June.
The June figure was a deceleration from the adjusted 3.4% in May and the 3.8% in June of the previous year. It also marked the slowest progression in three months or since the 0.8% decrease recorded in March.
Over the first half of the year, the average growth rate for factory output was 1.4%, slower than the 2% average for the same timeframe last year.
On a monthly comparison, output in June contracted by 4.7%, a shift from the 2.6% observed in May. When excluding seasonal influences, it declined by 2.5%.
The PSA attributed the slowdown in factory output in June to significant annual declines in basic metals (-23.2% in June compared to -12.5% in May), coke and refined petroleum products (-12% as opposed to -6.1%), and chemicals and chemical products (-14.7% down from -9.9%).
Five additional sectors recorded decreases while the remaining 14 experienced growth.
The top three industry sectors that contributed to the overall year-on-year increment in the VoPI were food products (26.3% up from 15.5%), transport equipment (13% down from 14.8%), and computer, electronic, and optical products (4.8% down from 5%), as stated by the PSA.
In contrast, the Philippines in the S&P Global Manufacturing Purchasing Managers’ Index (PMI) grew to 50.7 in June, up from 50.1 in May, reflecting the most robust pace in two months.
PMIs serve as a leading indicator for manufacturing activities, indicating the volume of materials procured in anticipation of production weeks or months ahead. A figure above 50 delineates growth from contraction.
The slowdown in factory output, particularly the deceleration observed in three sectors, can be linked to rising costs of imported materials due to global trade uncertainties and a depreciated peso, remarked Cid L. Terosa, senior economist at the University of Asia and the Pacific.
“Though muted and slower than in preceding months, demand for domestically produced goods seems to have been maintained amid lower inflation,” Mr. Terosa noted in an email.
Philippine Chamber of Commerce and Industry Chairman Sergio R. Ortiz-Luis Jr. stated that “many exporters and manufacturers moderately slowed from May to June before announcing the (tariff) due to concerns about potential expansion.”
“Year on year, we saw a certain increase; however, it was influenced by Trump’s tariff,” he commented in a phone interview incorporating both Filipino and English.
In April, US President Donald J. Trump declared a 17% reciprocal tariff rate on goods from the Philippines, although its implementation was postponed until July.
Earlier in July, he elevated this tax to 20%. Following his meeting with Philippine President Ferdinand R. Marcos Jr., Mr. Trump instituted a new 19% tariff on Philippine products, effective from August 7.
“Tariffs could result in a drop in manufactured exports. Electronics and semiconductor exports, which account for over 50% of our total exports to the US market, are likely to remain less affected as electronics are supported by WTO (World Trade Organization) Information Technology agreements,” Mr. Terosa said.
According to Nicholas Antonio T. Mapa, chief economist at Metropolitan Bank & Trust Co., manufacturing confronts obstacles owing to Trump’s 19% tariff imposed on the nation.
“An additional concern is the recently disclosed potential 100% tariff on electronics entering the US, which may suppress demand for electronic exports from the Philippines,” he remarked in a Viber message.
Marites M. Tiongco, dean at De La Salle University School of Economics, emphasized that the nation should diversify export markets to “mitigate the risk related to US market concentration.”
Looking ahead, Mr. Terosa highlighted the implications of US reciprocal tariffs, a weakened peso, and ongoing geopolitical tensions as emerging threats that could hinder the country’s manufacturing sector.
Manufacturing comprises nearly 20% of the nation’s gross domestic product. — Heather Caitlin P. Mañago
