PH factory output hit 6-mo high in January 2025, says PSA
Local manufacturing output grew to its highest level in six months in January, as the interest rate cuts started to spur more bank lending to businesses to fund various production activities.
A monthly integrated survey of selected industries showed the volume of production index (VoPI), a gauge of factory output, grew by 3.2 percent year-on-year in the first month of 2025, the Philippine Statistics Authority (PSA) reported on Friday.
That was much faster than the 0.4 percent uptick in December 2024. At the same time, the January VoPI was a turnaround from the 0.3 percent contraction a year ago.
Overall, the factory output growth in January was the best in seven months, or since the 7.4 percent expansion back in July 2024.
While the uptick in VoPI was magnified by base effects, Reinielle Matt Erece, an economist at Oikonomia Advisory & Research Inc., said there might have been a convincing growth in manufacturing activity in January due to lower interest rates and cheaper oil prices.
“The year-on-year growth of the VoPI can be attributed to base effects, wherein the rate cuts last quarter allowed manufacturing expansion and business activity growth. This made the volume of production larger than that of January last year,” Erece explained.
“Apart from interest rates, we can also attribute the growth of production to stable oil prices, which caused manufacturing activity to ramp up and increase their utilization amidst a relatively lower-energy cost environment,” he added.
Dissecting the PSA’s report, manufacture of food products, whose 9.4-percent growth reversed the 0.3 percent decline in the preceding month, was the top contributor to the overall increase in VoPI in January.
The second biggest driver of production activity was basic metals after growing by 2.4 percent, marking a recovery from the 19.5-percent contraction in December.
Meanwhile, finished machinery and equipment that came out of factories surged by 62.1 percent in January, from 40.9 percent in the prior month, making a big contribution to the expansion in the headline VoPI.
Amid the more robust manufacturing activity, PSA data showed the average capacity utilization rate of local factories stood at 75.9 percent in January, from the 75.6 percent in the previous month.
“I expect manufacturing growth to increase this year, as a result of higher consumption and lower interest rates,” Oikonomia’s Erece said.
“Another factor to monitor would be the rising trade tensions among the large global producers which can give some trading opportunities for smaller exporters such as the Philippines, contributing to higher production growth,” he added.
