Philippine manufacturers are already feeling the heat from global trade uncertainties, with factory output taking a hit at the start of the second half of the year, according to Moody’s Analytics.

“With stiffer United States (US) tariffs on the horizon, Philippine industrial production fell for the first time in four months in July. By volume and value, output fell in year-on-year terms. A 1.1-percent drop in volume was the steepest fall since February, while the 1.3-percent drop in value was the largest since November,” Moody’s Analytics said in a Sept. 12 report.

“The U-turn underscores the manufacturing sector’s vulnerability to external shocks,” Moody’s Analytics added.

Moody’s Analytics was referring to the results of the Philippine Statistics Authority’s (PSA) latest monthly integrated survey of selected industries (MISSI) for July, released last Sept. 9.

A proxy for factory output, the volume of production index (VoPI) for manufacturing fell by 1.1 percent in July, reversing the 1.6-percent increase in June.

By contrast, VoPI posted a seven-percent year-on-year gain in July 2024.

According to the PSA, the manufacture of basic metals, coke and refined petroleum products, as well as chemicals and chemical products continued to post faster year-on-year declines of 25.4 percent, 15.7 percent, and 22.2 percent, respectively, dragging overall VoPI.

The VoPI decline also was driven by slower growth in food products (16.5 percent in July from 22.4 percent in June); computer, electronic, and optical products (five percent from 7.3 percent); and transport equipment (9.3 percent from 13 percent).

Within food manufacturing, the deceleration in July was attributed to six out of eight industry groups showing slower growth.

The manufacture of vegetable and animal oils and fats dropped to 7.2 percent from 21.4 percent in June, while dairy products slowed to 1.3 percent from 4.3 percent.

Meanwhile, the PSA reported that the value of production index (VaPI) for manufacturing also fell, declining 1.3 percent in July from a 1.2-percent increase in June. It had risen 6.6 percent in July 2024.

The decline in annual VaPI growth in July was mainly due to the slower increase in the manufacture of food products, which eased to 17 percent from 22.9 percent in June.

The PSA said that food manufacturing accounted for 40 percent of the slowdown in July VaPI, as it is the industry division with the largest weight in calculating manufacturing VaPI.

PSA data also showed that other contributors to the July VaPI decline were a sharper drop in chemicals (22.3 percent from 13.9 percent in June) and slower growth in transport equipment (7.9 percent from 11.8 percent).

(Ricardo M. Austria)