'Low base' boost brings factory output back to growth path in April

MANILA, Philippines — Manufacturing output finally returned to the positive territory for the first time in over a year in April, thanks to so-called “low-base effects” that hardly tell a convincing improvement in local factories’ health.

Factory output, as measured by the volume of production index (VoPI), grew 162.1% year-on-year in April based on results of a monthly survey of select industries, the Philippine Statistics Authority reported Tuesday.

The latest reading reversed 13 straight months of double-digit decline that started when coronavirus lockdowns were first imposed in March last year. This, despite the retightening of curbs in Metro Manila and four nearby areas from late March to mid-April that hampered factory production anew and dampened consumer demand.

But analysts said the data should be taken with a grain of salt.

Ruben Carlo Asuncion, chief economist for UnionBank of the Philippines, said the April data was likely distorted by low base. This is because 2020’s VoPI figures were so low that even a small gain in 2021 would translate to stronger year-on-year readings.

 “Conditions of April 2020 are not the same of April 2021. The uptick in the VoPI is definitely due to a low base effect,” Asuncion explained in an email exchange.

“The first lockdown in April 2020 rendered everyone clueless of how to approach the spreading virus. Fast forward to April 2021, although we did have another ECQ in NCR plus recently, companies and employees have somehow adjusted to the restrictions made by government to help curb the virus' spread,” he added.

Michael Ricafort, chief economist of the Rizal Commercial Banking Corp., agreed with Asuncion, saying the rebound was “largely mathematical in nature.”

Breaking down the PSA’s report, only two industries posted negative growth in April: coke and refined petroleum products (-32.3%) and basic pharmaceutical products (-18.9%). The rest were in the green, led by basic metals which grew 687% on-year.