Oil refining pulls down manufacturing output

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    The country’s factory output plunged by 43.6 percent in February, amid the significant drop in the manufacture of coke and refined petroleum products, data released by the Philippine Statistics Authority (PSA) showed yesterday.

    According to the PSA, the decline in the volume of production index (VoPI) was faster than the 12 percent decrease registered in the previous month.

    In contrast, the annual rate for VoPI in February 2020 increased by 0.4 percent.

    The PSA said the downturn in VoPI was brought about by the contractions in the indices of 19 industry divisions.

    Among these, the top contributor was manufacture of coke and refined petroleum products, which fell by 85.4 percent.

    “The sharp year-on-year decline in manufacturing activities may largely reflect the sharp reduction in petroleum refining activities amid scaled down operations by some of the biggest industry players in response to slower demand in the local economy since the COVID-19 pandemic in 2020, partly shifting to importation of some refined petroleum products instead,” Michael Ricafort, Rizal Commercial Banking Corp. chief economist, said.

    Ricafort pointed out the sharp decline in manufacturing production activities came even before the start of tighter quarantine restrictions since March 22, 2021, in National Capital Region (NCR) Plus.

    “Thus, for the coming months, the tighter quarantine restrictions in NCR Plus since late March 2021, in an effort to curb new COVID-19 cases after reaching new record highs recently, could still lead to a significant slowdown in manufacturing activities, especially hard-hit/non-essential manufacturing businesses/industries, as well as the broader economy,” Ricafort said.

    “This is in view of the significant reduction in demand and in the capacity of many businesses/industries, though offset by the continued operations of some essential businesses/industries. However, the year-on-year declines in the coming months would be mathematically mitigated/offset by the sharply lower denominator/base effects in view of the anniversary of the hard lockdowns,” he added.

    Karl Kendrick Chua, acting socioeconomic planning secretary, for his part said even with an enhanced community quarantine, manufacturing can continue to operate as well as transportation and logistics.

    “These will support the supply side,” Chua said in a Viber message to reporters.

    The Value of Production Index (VaPI) for manufacturing also posted a downturn in February 2021 with an annual rate of 46.5 percent, from its previous month’s annual drop of 16.7 percent.

    The February 2021 figure was the fastest decline since October 2020. In February 2020, the annual decrease of VaPI was recorded at 2.6 percent.

    The PSA said the decline in VaPI for the manufacturing sector in this period was due to the negative annual growth rates in the indices of 20 out of 22 industry divisions.

    Of these, manufacture of coke and refined petroleum products was the major contributing factor with 89.3 percent decline.

    Based on responding establishments, the average capacity utilization rate for the manufacturing sector in February 2021 was posted at 53.8 percent from 56.7 percent in the previous month, the PSA said. – Angela Celis