Domestic trade in goods drops by 22% in Q2

By Beatriz Marie D. Cruz, Senior Reporter

THE PHILIPPINES’ domestic trade in goods declined by 22% in the second quarter as heightened economic uncertainty weakened demand and business sentiment, analysts said.

Preliminary data from the Philippine Statistic Authority’s (PSA) Commodity Flow Survey showed that the value of total domestic trade fell by 21.9% to P745.7 billion in the second quarter from P955.18 billion last year.

By volume, domestic trade slid by 37.9% to 10.57 million tons from 17.02 million tons a year ago.

Domestic trade by value refers to the outflow value of commodities transported from its place of origin to the destination.

Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said the second-quarter domestic trade slump could be linked to softer demand, slower movement of goods, and a more cautious business sentiment.

“Businesses appear to be managing inventories more conservatively amid lingering economic uncertainties, while weaker manufacturing and investment activity likely reduced the shipment of both intermediate and capital goods,” he said in a Viber message.

Rising oil prices caused by the Middle East war that broke out earlier this year drove up the costs of goods, transport and logistics, as well as dampened consumer and business confidence.

Ateneo Center for Economic Research and Development Senior Research Fellow Ser Percival K. Peña-Reyes said the decline in domestic goods trade may be due to weaker industrial activity during the quarter.

“The domestic trade slump in Q2 (second quarter) could be seen primarily as a transport/logistics and shipment-composition phenomenon, especially involving maritime trade, with weaker overall industrial activity potentially contributing — but not sufficient by itself to explain the magnitude of the decline,” he said in Facebook Messenger chat.

PSA data showed the value of commodities transported by road rose by 9.8% to P542.73 billion, accounting for 72.8% of the total.

The value of goods transported through water plunged by 56% to P202.42 billion (27.1% market share), while those transported by air dropped by 16.9% to P560 million (0.1% market share).

“There appears to be a dramatic contraction in sea/coastal movement of goods and possibly a shift from water to road transport, rather than a simple collapse in Philippine economic activity,” Mr. Peña-Reyes said.

By commodity, machinery and mechanical appliances reported the highest outflow value at P183.41 billion or a 24.6% share to the total value of domestic trade during the period.

This was followed by prepared foodstuffs at P147.64 billion (19.8% market share), and optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments at P93.11 billion (12.5% market share).

In the April-to-June period, Calabarzon posted the highest outflow value of traded goods at P331.63 billion, representing a 44.5% market share. This was followed by the National Capital Region (NCR) at P115.89 billion (15.5% market share), and Central Luzon with P108.41 billion (14.5% market share).

On the other hand, the Zamboanga Peninsula saw the lowest outflow value of traded goods during the quarter, which amounted to P2.01 billion or a market share of 0.3%.

Meanwhile, the NCR recorded the largest inflow value in the second quarter at P361.56 billion, making up 48.5% of the total. Calabarzon followed with an inflow value of P82.13 billion or 11% of the total, and Central Visayas with P38.7 billion or a 5.2% market share.

PSA data showed that Calabarzon saw the largest trade balance — the difference between outflow value and inflow value — in the second quarter at P249.5 billion.

Mr. Ravelas noted that this reflects Calabarzon’s pivotal role as a manufacturing and logistics hub.

Other regions that posted a large trade balance include Central Luzon (P71.94 billion) and the Negros Island Region (P32.89 billion).

Mr. Ravelas said stronger infrastructure spending and improved macroeconomic fundamentals would help boost domestic trade.

“Moving forward, stronger infrastructure spending, easing inflation, and a more supportive interest rate environment will be key to reviving domestic trade and strengthening economic momentum in the second half of the year,” he said.