Manufacturing sector sees faster growth amid high inflation

The primary contributor to the total increase in the manufacturing sector was due to an increase in the price of basic metals

The manufacturing sector activities witnessed faster growth amid a quicker increase in production as well as factory orders, and renewed expansion in international sales, according to the first quarter report of the economic and environmental statistics of the National Statistics Bureau (NSB).

The manufacturing sectors, however, are the primary driver of the inflation rate for January, February, and March as compared to the same months of the previous year and are recorded at 1.85%, 1.32%, and 1.42% respectively.

On average this is an increase of 1.53% from the first quarter of the previous year.

And while consumers across the economic spectrum are feeling the pinch, accelerated inflation tends to squeeze low and fixed-income earners the most.

In addition, the transportation sector was next, with a three-month average gain of 4.65% from January – March.

The primary contributor to the total increase in the manufacturing sector was due to an increase in the price of basic metals.

In January, February, and March, the mining and quarrying sector declined -1.11 %, -1.22 %, and -0.91 % respectively.

Meanwhile, the industry sector was severely hit by the pandemic, recording a contraction of 13.1% in 2020 from positive growth of 2% in 2019. The impact would have been much higher had it not been for the hydropower sector, which remained unaffected by the pandemic.

In 2021 the industry sector is estimated to grow at 4.9% and 4.1% in 2022 as construction activities pick up with the surge in capital spending and relaxation in labor imports.

Some of the major activities include the development of dry ports at Pasakha, Gelephu, and Nganglam with Nu 516.199mn, the establishment of industrial estates, and parks at Dhamdhum, Pasakha, Bjemina, Jigmeling, and Motanga with Nu 218mn, and export diversification under brand Bhutan with Nu 20mn.

Meanwhile, the information and communication sector has dropped 7.65% on average.

In each of the three months, the electricity and gas sector increased by 0.11%. Logging and water supply prices remained unchanged.

The month-to-month (Producer Price Index) PPI decreased in January and February by 5.85% and 1.69% respectively, while it increased in March by 0.53%.

The PPI is the measure of the average change over time in the prices received by the domestic producers of goods and services. It shows the average change in the prices of goods and services with reference to a particular reference period known as index reference.

The PPI covers domestically produced goods and services that are destined for domestic as well as export markets. The sectors included are logging, mining and quarrying, manufacturing, utilities (electricity and water), transport, and communication sector. PPI is classified and compiled by activity and also by product.

On average, it decreased by 2.34% in the first quarter due to a decrease in the price of the manufacturing sector by 12.13% and 3.54% in January and February respectively, while it increased in March by 1.03%.

The mining and quarrying sector showed a slight increase of 0.31% in March. And the transport sector increased by 2.37%, 0.21%, and 0.44% in January, February, and March respectively.

Prices remained the same for logging, water supply, information and communications, and the electricity and gas sector in all three months.

Kinley Yonten from Thimphu