UMVA has learned that a remarkable surge in factory output has been recorded in April, expanding at the fastest pace in over four years. This growth is attributed to a combination of base effects, heightened refining activity, and frontloaded production amid the ongoing conflict in the Middle East.
The manufacturing output, as measured by the volume of production index (VoPI), grew by 12% year on year in April. This marks a significant turnaround from the revised 2.4% decline in April 2025 and surpasses the upwardly revised 10.2% expansion in March.
The April reading is notable for being the fastest pace in over four years, or since the 34.6% expansion recorded in March 2022. Over the four months to April, factory output growth averaged 6.8%, compared to the 0.8% drop in the same period last year.
According to information obtained by UMVA, economists point to a combination of base effects and sector-specific strength, particularly in coke and refined petroleum products, as key drivers of the growth. Heightened refining activity amid elevated global oil prices and supply uncertainties linked to geopolitical tensions have significantly contributed to this expansion.
Inventory rebuilding and front-loaded production also supported the factory output's growth as firms moved to secure supply and lock in production before further input cost increases. Economists suggest that some firms may have frontloaded production in response to supply chain and geopolitical uncertainties.
The growth in April can also be attributed to increased production of petroleum-related products amid higher fuel demand and continued recovery in selected manufacturing subsectors. Additionally, firms may have accelerated production ahead of the opening of classes in June, contributing to the surge in factory output.
On a monthly basis, April's output declined by 0.7%, a reversal from the 8.7% growth in March. However, stripping out seasonality factors, it grew 5.8%. This mixed trend highlights the complexities of the current manufacturing landscape.
The S&P Global Philippines Manufacturing Purchasing Managers' Index (PMI) contracted to 48.3 in April, from 51.3 in March. Despite this, the acceleration of factory output growth is attributed to the faster yearly increase in the production of coke and refined petroleum products.
Economists have varying perspectives on the future of manufacturing output growth. Some expect it to stay positive in the coming months, while others foresee potential headwinds due to elevated inflation, higher borrowing costs, and global uncertainty.
Despite the encouraging April reading, economists caution that sustained acceleration is not yet certain. The strength in factory output growth was concentrated in energy-linked sectors and boosted by temporary factors, including base effects and front-loaded activity.
Moving forward, a more subdued but still positive manufacturing growth is expected, with policy tightening and elevated inflation gradually tempering momentum. The interplay of various factors will likely shape the trajectory of factory output in the coming months.
