Philippines Manufacturing PMI Hits Nine-Month High Despite Weak Confidence Outlook

The Philippines manufacturing sector showed a notable rebound at the start of the year, as the S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) climbed to a nine-month high of 52.9 in January, up from 50.2 in December. A PMI reading above 50 signals expansion, highlighting renewed momentum in the country’s manufacturing activity after several months of subdued performance.

According to the latest S&P Global data, the improvement was primarily driven by a return to growth in factory output for the first time in five months. This recovery was supported by faster growth in new orders, reflecting strengthening demand conditions. Importantly, new export orders also increased for the first time since September, albeit at a modest pace, providing additional support to overall production levels.

As demand conditions improved, Filipino manufacturers adjusted their operations accordingly. Employment levels rose in January following two straight months of slight declines. While the increase in workforce numbers was modest, it marked the fastest pace of job creation since June last year. This allowed manufacturers to reduce their backlogs of work for the first time in three months, easing operational pressures.

Purchasing activity also gained momentum, growing at its fastest pace in 12 months. Companies focused on rebuilding inventories, with input stocks rising for the first time in three months. Post-production inventories increased for a second consecutive month, signaling improved confidence in near-term sales conditions and production requirements.

However, despite these positive indicators, business confidence weakened sharply. Expectations for future output fell to the second-lowest level recorded since data collection began in January 2016, surpassed only by the downturn seen in March 2020 during the onset of the COVID-19 pandemic. S&P Global Market Intelligence economist Maryam Baluch noted that concerns over export demand and the sustainability of recent improvements weighed heavily on sentiment.

On the price front, inflationary pressures remained muted. Input costs rose only marginally due to higher raw material prices, while output prices increased slightly, with both remaining below long-term averages. Meanwhile, supply chain challenges persisted, as manufacturers reported longer input delivery times compared to December, underscoring ongoing logistical constraints within the sector.