April factory output growth fastest in over 4 years

By Isa Jane D. Acabal, Researcher

Factory output expanded at the fastest pace in over four years in April due to base effects, heightened refining activity, and frontloaded production amid the ongoing conflict in the Middle East, analysts said.

Preliminary results of the Philippine Statistics Authority’s Monthly Integrated Survey of Selected Industries showed manufacturing output, as measured by the volume of production index (VoPI), grew by 12% year on year in April.

This was a turnaround from the revised 2.4% decline in April 2025 and above the upwardly revised 10.2% expansion in March.

The April reading was the fastest pace in over four years or since the 346% expansion recorded in March 2022.

In the four months to April, factory output growth averaged 6.8%, versus the 0.8% drop in the same period last year.

“April’s 12% expansion in factory output was primarily driven by a combination of base effects and sector-specific strength, particularly in coke and refined petroleum products, which benefited from heightened refining activity amid elevated global oil prices and supply uncertainties linked to geopolitical tensions,” Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said in an email.

He said that 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.”

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, also attributed the faster growth in April to “increased production of petroleum-related products amid higher fuel demand, and continued recovery in selected manufacturing subsectors.”

“Some firms may have also frontloaded production in response to supply chain and geopolitical uncertainties,” he added in a Viber message.

Meanwhile, Cid L. Terosa, an associate professor of economics at the University of Asia and the Pacific, said April’s factory output growth can be traced to greater demand for coke and refined petroleum products as firms fast-tracked production ahead of the opening of classes in June.

“High refining margins must have driven refineries to boost production and expand processing,” he said in an email.

On a monthly basis, April’s output declined by 0.7%, a reversal from the 8.7% growth in March. Stripping out seasonality factors, it grew 5.8%.

In comparison, the S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) contracted to 48.3 in April, from 51.3 in March.

PMI is a leading indicator for factory activity, which reflects the volume of purchased raw materials in advance of manufacturing operations weeks or months down the line. A reading above 50 signals expansion, while a reading below 50 indicates deterioration.

The PSA attributed the acceleration of factory output growth to the faster yearly increase in the production of coke and refined petroleum products to 52.7% in April from the 7.4% decline a year ago and the 3.4% drop in March.

Sergio R. Ortiz-Luis, Jr., honorary chairman and treasurer of the Philippine Chamber of Commerce and Industry, said by telephone that “because of the [Middle East] crisis, we needed to import a lot of oil, and we need to refine them.”

Of the remaining 21 divisions, 14 posted expansions, while seven industries saw declines.

According to the PSA, the top three industry divisions that contributed to the overall year-on-year growth of VoPI for manufacturing were coke and refined petroleum products, computer, electronic and optical products (14.1% in April from 18.1% in March), and food products (8.2% from 10.7%).

Analysts said the rate cut and the spike in inflation had limited effect on April’s manufacturing output due to lags in policy transmissions.

April inflation accelerated to a three-year high of 7.2%. The central bank also raised key policy rate by 25 basis points to 4.5% in April.

“Instead, elevated inflation — especially from energy costs — may have actually encouraged firms to accelerate production ahead of further cost increases. While higher oil prices raised input costs for many manufacturers, they simultaneously boosted output in petroleum-related industries, which drove the overall expansion,” Mr. Asuncion said.

Mr. Rivera said firms generally increased production costs but these may not have fully materialized during the month “as manufacturers were still responding to demand conditions and inventory requirements.”

“Impact is likely to become more evident in next months,” he added.

Capacity utilization, or the extent to which industry resources are used in producing goods, averaged 78.4% in April, higher than the revised 76.5% in the same month in 2025. However, this was lower than the revised 78.6% logged in March.

Due to the lagged effects of the rate cuts, Mr. Terosa said the manufacturing production will likely face headwinds moving forward.

Mr. Rivera expects manufacturing output growth to stay positive in the coming months.

“(Manufacturing) could moderate as elevated inflation, higher borrowing costs, and global uncertainty weigh on demand and investment. Key risks are oil prices, external demand, and supply-chain disruptions,” he said.

Meanwhile, Mr. Asuncion said the April reading does not indicate sustained acceleration despite being “encouraging.”

“The strength was concentrated in energy-linked sectors and boosted by temporary factors, including base effects and front-loaded activity. Moving forward, we expect more subdued but still positive manufacturing growth, with policy tightening and elevated inflation gradually tempering momentum,” he added.