Philippines manufacturing outlook improves as Dec PMI tops 50

The Philippines’ manufacturing sector has ended the fourth quarter on a cautiously positive note, with the latest Purchasing Managers’ Index (PMI) data pointing to early signs of recovery. The Manufacturing PMI rose to 50.2 in December from 47.4 in November, moving back above the neutral 50 mark and signalling a slight improvement in overall operating conditions after a sharp deterioration in the previous month.

Philippines manufacturing has showed early recovery signs as PMI rose to 50.2 in December from 47.4 in November.
New orders grew for the first time since August, easing output and job declines.
Export demand weakened sharply, while purchasing activity and inventories stabilised.
Cost pressures softened, output prices rose modestly, and firms remained cautiously optimistic for 2026.

Improved demand conditions underpinned the uptick, as total new orders increased for the first time since August, ending a three-month period of contraction. While the pace of growth was modest, it was the strongest recorded since April.

In contrast, foreign demand remained a drag on performance, with new export orders falling sharply and the relevant index slipping further below 50, marking the steepest decline in around 15 months, S&P Global said in a release.

The rise in new business helped ease, but not reverse, the downturn in production. Output continued to fall moderately in December, extending the current contraction to four months—the longest such sequence since 2021.

Even so, manufacturers responded to higher order inflows by stepping up purchasing activity for the first time in three months, with input buying rising at its fastest pace since August. This helped stabilise inventories, with pre-production stocks unchanged after a sharp drawdown in November and finished goods inventories rebuilding slightly.

Labour market conditions also showed tentative signs of stabilisation. Employment declined for a second consecutive month, but the rate of job shedding slowed significantly and was marginal overall. Some firms continued to reduce headcount due to weak production requirements, while others increased staffing in anticipation of stronger demand in the months ahead.

“New order volumes rose for the first time in four months, which helped partly ease the ongoing downturn in production. Fuelled by this positive direction, companies increased their purchasing activity for the first time since September, while the labour market showed signs of stabilising,” Maryam Baluch, economist at S&P Global Market Intelligence, said commenting on the latest survey results.

At the same time, input delivery times lengthened, reversing November’s improvement, as port congestion and adverse weather disrupted supply chains, although supplier performance deteriorated only slightly.

On the cost front, operating expenses rose at the slowest pace in 19 months, reflecting subdued input price inflation despite higher material costs for some firms. Output prices increased at a slightly faster rate than in November as manufacturers passed on part of the cost burden, though price rises remained modest by historical standards.

Looking ahead, firms expect output to rise over the course of 2026, supported by new projects, product launches and expansion plans, although overall optimism eased slightly from November’s recent one-year high.

“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. Additionally, 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,” Baluch added.

Fibre2Fashion News Desk (HU)