-
Operating conditions in the Philippine manufacturing sector saw slight improvement in December 2025 as new orders volume rose
-
The manufacturing sector’s headline purchasing managers’ index moved back above the neutral mark of 50.0, rising to 50.2 from 47.4 in November
-
Foreign demand for Filipino manufactured goods worsened in December, as a fall in new export orders weighed on the upturn in total sale
-
There was reported increase in average lead times for inputs with port congestion and adverse weather conditions were cited as contributing factors
-
Companies expect output to rise over the course of 2026 with anecdotal evidence reporting upcoming projects, the launch of new product lines, and business expansion plans
Operating conditions in the Philippine manufacturing sector saw slight improvement in December 2025 as new orders volume rose, according to the latest S&P Global purchasing managers’ index (PMI) survey data.
The manufacturing sector’s headline PMI – a composite single-figure indicator of manufacturing performance – moved back above the neutral mark of 50.0 in December, rising to 50.2 from 47.4 in November.
In contrast to the solid deterioration observed in the previous month, the latest data signaled a slight improvement in the overall health of the manufacturing sector, S&P Global said in a statement.
“New order volumes rose for the first time in four months, which helped partly ease the ongoing downturn in production,” S&P Market Intelligence economist Maryam Baluch said.
The pace of increase in new orders was modest but the most pronounced since April.
“That said, the improvement was tepid across the sector, and its sustainability will largely depend on whether demand can be maintained and further bolstered, bringing growth back to production,” Baluch noted. She added that the sector faces notable headwinds from sharply declining export market conditions, which are limiting the potential for broader expansion.
“Consequently, at present, the manufacturing sector’s growth is primarily being driven by domestic demand, with external markets offering little support,” she added.
Foreign demand for Filipino manufactured goods worsened in December, as a fall in new export orders weighed on the upturn in total sales. The respective seasonally adjusted index moved further below the neutral 50.0 mark, indicating a sharp decline and one which was strongest in 15 months, S&P Global noted.
While the modest rise in new orders led to a softer fall in production levels, it was unable to reverse the downturn with output falling moderately in December. Moreover, the latest four-month sequence of contraction was the longest since 2021.
Firms, however, made efforts to raise their capacity in line with higher intakes of new orders. Purchasing activity rose for the first time in three months and at the fastest pace since August.
READ: PH manufacturing contracts at fastest rate in 4 years
The expansion in input buying enabled firms to better manage their inventory levels. After a sharp depletion in November, holdings of pre-production items were unchanged in December. Additionally, stocks of finished goods rose following a strong decline in November. Firms reportedly built up post-production inventories in anticipation of future demand.
At the same time, the labour market showed signs of stabilizing in December. Although job shedding was recorded for a second month running, the latest fall in employment was weaker than seen in November and fractional overall.
In December, manufacturers in the Philippines reported an increase in average lead times for inputs, reversing the improvement seen in previous month. Port congestion and adverse weather conditions were cited as contributing factors. Vendor performance, however, deteriorated only slightly.
With new orders rising while both production and employment remained in contraction, companies experienced a higher volume of requests for goods than they could fulfil. Consequently, backlogs of work increased further in December. The rate of accumulation was, however, marginal and slower than in November.
Turning to prices, operating expenses rose only slightly in December. The latest data signaled the weakest rate of inflation in the current 19-month period of rising costs. Where an increase was noted, firms cited that higher material prices drove up input costs.
The pace of output price inflation, meanwhile, accelerated from November, as many firms indicated they passed higher raw material costs on to customers. The increase in selling prices remained modest and weaker than the long-run average.
Companies expect output to rise over the course of 2026. Anecdotal evidence reported upcoming projects, the launch of new product lines, and business expansion plans. That said, the degree of optimism edged down from November’s recent 12-month high.
