Manufacturing grew at a double-digit rate in the first month of 2023 on optimism about economic reopening despite the offsetting risk factors such as elevated inflation and higher interest rates.
Results of the Philippine Statistics Authority’s Monthly Integrated Survey of Selected Industries on Thursday showed the volume of production index expanded 10.6 percent year-on-year in January, faster than 4.2 percent in December, but slightly slower than 10.9 percent a year ago.
The value of production index also climbed 15.4 percent in January, faster than 9.5 percent in December and 15.1 percent in the same period in 2022. The higher growth in the value of production index partly reflected the higher producer price index.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said the double-digit expansion in January production was “largely brought about by the fact that the economy further reopened towards greater normalcy, with no large lockdowns so far in 2022 and no lockdowns going forward as a priority of the administration.”
“The pickup in manufacturing activities in January 2023 also came after the higher number of holidays that somewhat slowed down manufacturing activities in December 2022, as well as offsetting risk factors such as higher inflation, higher interest rates, risk of US recession that are drags on manufacturing activities,” Ricafort said.
Inflation in January soared to a 14-year high of 8.7 percent, prompting monetary authorities to raise the key interest rate on Feb. 16, 2023 by another 50 basis points to 6 percent.
Ricafort said the economic reopening in China would also lead to higher global exports, which could support faster growth of the local manufacturing sector in the coming months.
The PSA attributed the expansion of the volume of production index in January to the annual increases in the indices of food products at 17.3 percent; transport equipment, 24.3 percent; and electrical equipment, 53.6 percent.
The PSA said that based on responding establishments, the average capacity utilization rate for manufacturing sector in January improved to 72.6 percent from 71.5 percent in December.
It said nearly all industry divisions reported capacity utilization rates of more than 60 percent, except for paper and paper products. The top three industry divisions with highest capacity utilization rates were wearing apparel (78.3 percent), machinery and equipment except electrical (77.8 percent) and transport equipment (77.3 percent).
Improved manufacturing supported the employment sector in January. The Philippine Statistics Authority reported that unemployment rate declined to 4.8 percent in January from 6.4 percent in the same month last year.
The employment rate accelerated to 95.2 percent, which translated into an additional 4.1 million employed persons, on account of employment gains in the services and agriculture sectors in January. This brought total employment to 47.4 million from 43.3 million in January 2022, according to the National Economic and Development Authority.
The labor force participation rate also rebounded to 64.5 percent, equivalent to 49.7 million Filipinos in the labor force. Of the total, 20.6 million are women.
“The latest employment indicators show the robust recovery and growth of our labor market from its slump in January 2022, when the surge in Omicron cases prompted stringent mobility and capacity restrictions,” NEDA Secretary Arsenio Balisacan said.