Manufacturing output growth slows

Business World

Factory output moderated to a 10-month low in October, results economists and industry officials attributed to manufacturers already having wrapped up production ahead of Christmas.

Manufacturing output, as measured by the volume of production index (VoPI), grew by an annual 16.3%, the National Statistics Office (NSO) reported on Thursday.

The October number was the lowest since December last year when the index rose by 12.2%. Still, it was a reversal from the 6% slump recorded the same month a year ago.

Cid L. Terosa, senior economist at the University of Asia and the Pacific (UA&P), said "the production cycle is supposed to have ended by the start of the fourth quarter, so that they [manufacturers] will not keep a lot of inventories."

Sergio R. Ortiz-Luis, Jr., president of the Philippine Exporters Confederation, Inc., agreed, saying production seasonally plateaus in the fourth quarter as manufacturers complete servicing orders for Christmas delivery.

"The slowdown in production in the last quarter of the year is normal. [Manufacturers] ship out their output before the Christmas season," Mr. Ortiz-Luis said.

Economists also pointed out that any inventory -- mostly of imported raw materials -- built for the rest of the year is meant for domestic production use in early 2011.

Donald G. Dee, vice-chairman and treasurer of the Philippine Chamber of Commerce and Industry, added that the "normal cycle of [output] delivery" is during the Christmas season or as the year ends.

"[At this time], we do not expect the production output to go up; activities would pick up next year," Mr. Dee said.

Of the 20 sectors included in the survey, 15 posted increases in output, with double-digit growth led by miscellaneous manufactures (50.2%), paper and paper products (26.3%), publishing and printing (25.3%), machinery except electrical (19.4%) and electrical machinery (17.6%).

Food manufacturing, an index heavyweight, rose by 10.6%, while beverage production climbed by 11.4%. Manufacturers of transport equipment, basic metals and textiles also reported double-digit gains.

Manufacturers of tobacco, footwear, furniture and leather, meanwhile, slashed output.

Average capacity utilization -- which measures the rate at which potential output levels are being used -- stood at 83.5%. -- Dionna Fe M. Falamig