The country’s manufacturing output declined in May, a first for 2016, owing to a significant drop in leather, chemical, and petroleum products production, according to the National Economic and Development Authority (NEDA).

In the Philippine Statistics Authority’s Monthly Integrated Survey of Selected Industries for May 2016, the Volume of Production Index (VoPI) declined by 1.2 percent, close to  to the 1.1 percent decline in the same period last year.

Similarly, the Value of Production Index (VaPI) declined by 4.9 percent, although slower than last year’s 8.0 percent reduction.

“This drop in manufacturing production is the first for 2016. As business sentiment remains optimistic and supported by stable consumer confidence, industrial output is expected to improve towards the end of the second quarter,” said Socioeconomic Planning Secretary Ernesto M. Pernia.

He added that the manufacturing sector is expected to benefit from the economic agenda of the current administration, particularly on increasing competitiveness, easing business processes, accelerating infrastructure spending, and attracting foreign direct investment.

High levels of inventories in leather goods, drugs, and medicines posted at the beginning of the year continue to meet the demand for these products, resulting in a production slowdown.

Likewise, the volume and value of production in petroleum continued to decline, but at a slower pace due to higher demand for diesel from Europe and lower supply of oil from the US.

Pernia warned however that subdued global economic prospects, weaker-than-expected economic performance of major trading partners, and weather shocks such as La Niña and typhoons remain  risks to the manufacturing sector’s growth.

“The provision of adequate, sustainable and reliable infrastructure must be accelerated, and the capacity of MSMEs must be further enhanced by strengthened linkages with large corporations and through knowledge and technology transfer,” he said.

“Public and private investments in research and development activities must be encouraged. Engagement in high technology endeavors, as well as attracting foreign direct investments, will be influential to paving the way for the much needed blossoming of high-tech manufacturing sub-sectors in the country,” Pernia added.