Elevated inflation and interest rates triggered a slowdown in food production in June 2023.
“The still relatively higher inflation and higher interest rates led to slower investments, including for manufacturing,” Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said in a comment.
Ricafort was responding to the latest results of the Monthly Integrated Survey of Selected Industries released by the Philippine Statistics Authority showing that the volume of production index grew at a slower pace of 3.4 percent in June compared to 7.7 percent in May.
The value of production index rose 3.9 percent in June, representing a slowdown from 9.9-percent growth in May and 7.8 percent a year ago.
Ricafort said other factors for manufacturing’s decline in June were the softer economic data in China and the risk of recession in the United States, the world’s largest economy.
He said, however, that VoPI was still higher than a year ago, reflecting the measures to reopen the economy that increased production, sales employment and incomes.
“Business and economic activities picked up further since 2022, including for the manufacturing sector,” he said.
It said the slower annual growth of the VoPI in June was mainly brought about by the annual declines in food, beverage and fabricated metal output.
Data showed that manufacture of food products fell 3.2 percent in June after rising 6.9 percent in May; manufacture of fabricated metal products, except machinery and equipment, -36.4 percent from -2.9 percent; and manufacture of beverages, -7.7 percent from 4.8 percent increase.
Lower value of food production also weighed on VAPI. The value of food production declined 0.4 percent in June, from 10.8-percent annual increase in the previous month and 13.9 percent a year ago.
The downturn was led by the decline in dairy products at -9.8 percent in June from a 16.3 percent annual increment in the previous month.
“The manufacture of food products contributed 36.8 percent to the downtrend of VaPI for the manufacturing section in June 2023. Out of the 22 industry divisions for the manufacturing section, manufacture of food products was the industry division with the highest weight in the computation of VaPI,” it said.
Other main contributors to the slower year-on-year growth of VaPI in June were the annual declines in the manufacture of fabricated metal products, except machinery and equipment at -33.4 percent from a 2.8 percent annual increase in the previous month, and manufacture of beverages with an annual drop of -2.7 percent in June 2023 from 10.6 percent annual growth in the previous month.