MANILA – The Philippine manufacturing sector contracted slightly in July 2015 due to the continuing weakness in global demand, according to the National Economic and Development Authority (NEDA).

In the Philippine Statistics Authority’s Monthly Integrated Survey of Selected Industries for July 2015, the manufacturing sector’s Volume of Production Index (VoPI) contracted by 0.5 percent, much slower than the 3.0 and 1.6 percent declines in May and June 2015 respectively.

However, production volume remains a contrast from its 7.6 percent growth last year on the same month with its three-month moving average posting a drop of 1.0 percent.

“We must diversify and ensure the quality of our export-oriented products, which is the key to surviving the continuing weak global demand and stiffer competition in the global market,” said Economic Planning Secretary Arsenio M. Balisacan.

On the other hand, the Value of Production (VaPI) also contracted by 6.9 percent along with its three-month moving average which posted a 7.5 percent drop.

“Providing adequate and efficient infrastructure is a must to be able to provide reliable and cost-effective logistics and transport requirements for manufactured goods and other related services,” the Cabinet official said.

For consumer goods, the volume and value of net sales for beverages began to recover from its double-digit drop last May 2015 posting an increase of 7.9 and 17.4 percent respectively.  Also, tobacco continued its double-digit growth in volume and value of net sales with 14.7 and 15.8 percent, respectively.

However, the food sub-sector continues to fall, posting a 20.4- and 20.1-percent drop in volume and value of production while its net sales volume and value dropped by 16.0 and 17.4 percent respectively.

The 32.1-percent drop in production values of milled and refined sugar, together with the declining global demand and prices for dairy products, weighed down the sub-sector.

For intermediate goods, non-metallic mineral products sustained double-digit year-on-year growth in production and net sales by 19.8 and 20.2 percent in volume and 13.0 and 13.3 percent in value, respectively. The continuing growth in this subsector is backed by the steady demand from the private and public sectors for construction-related materials.

For capital goods, transport equipment is leading the growth in net sales by 31.5 and 28.8 percent in volume and value, with fabricated metal products coming in second with 16.3 and 18.8 percent respectively. The growth in these subsectors can be attributed to the increasing demand for logistics from local industries.

“Given the weak global demand, it is important to continue to stimulate domestic demand to fuel the manufacturing industry.  In the short to medium term, this can originate from the demand for housing and infrastructure. Thus, it is important to ensure that the government’s infrastructure program is implemented on time.  Private investments in housing should also be encouraged, specifically through regulatory reform and better access to housing finance, said Balisacan, who is also NEDA Director-General.

 Meanwhile, in terms of transport logistics, he also said that there is a need to implement coordinated, effective and innovative traffic schemes to maximize the capacity of existing infrastructure and road networks. This is needed, especially in the short-run, to support the growing passenger car sales and brisk-economic activities in manufacturing sub-sectors while major improvements in infrastructure and transport services are being worked out.

“Alleviating the traffic and transport woes of the country will not only benefit the people but the economy as well by attracting foreign and domestic investments for the manufacturing and services sectors,” he added.

“We remain optimistic about the manufacturing sector for the rest of the year as the incoming holiday season will boost both production and sales. The persistently low oil prices will also aid the industry in the coming months,” said Balisacan.