Volume of manufacturing output contracted by 0.2 percent in June on an annual basis, against the 25.2 percent growth recorded in the same month last year.

Output value grew 2.7 percent, but much slower than the 17.9 percent growth last year.

The National Statistics Office said the decline in output was felt mostly in the production of non-electrical machinery, wood products, transport equipment, basic metals, publishing, leather products and food manufacturing.

The decline in production value was felt mostly in miscellaneous manufactures and chemical products.

University of the Philippines economics professor Benjamin Diokno said growth in the manufacturing sector has been slowing since December last year.

"From a peak of 36.2 percent in January 2010, the index started to slow in December last year. The indices for the first six months are: 13.3 percent (January), 10.2 percent (February), 9.0 percent (March), 1.8 percent (April), 1.9 percent (May) and -0.2 percent (June)," said Diokno.

"The 0.2 percent drop in the volume of production index (VoPI) is a disappointment, coming after a modest rise in May (1.9 percent). Manufacturing was the major growth driver last year," he added.

Sales continued to slow down, posting a sharply lower 6.5 percent growth compared with 16.3 percent last year.

In terms of sales volume, the manufacturing sector posted a 3.5 percent growth, sharply slower than the 23.5 percent recorded in the previous year.

Leading the list of slowing sales were petroleum products, miscellaneous manufactures, beverages, and footwear and apparel.

In June, the average capacity utilization in the manufacturing sector stood at 83.2 percent.

Basic metals, petroleum, food manufacturing, non-metallic mineral products, electrical machinery, paper and paper products, chemical products, rubber and plastic products, miscellaneous manufactures, non-electrical machinery, and textiles posted capacity utilization of at least 80 percent.

The NSO said 16.8 percent of total establishments operated at full capacity (90 percent to 100 percent), while about 60.3 percent operated at 70 percent to 89 percent, and the rest operating below 70 percent capacity.