The start of the second half of 2025 indicated a relatively subdued performance for Filipino manufacturing, with output and new orders continuing to rise but at modest and historically muted rates. Growth in hiring and purchasing activity also lost momentum, according to the S&P Global Philippines Manufacturing PMI.
The PMI rose to 50.9 in July from 50.7 in June, signaling a modest improvement and returning growth momentum, the strongest since April.
Sentiment on the year-ahead outlook improved to a four-month high, driven by hopes of increased production.
Maryam Baluch, an economist at S&P Global Market Intelligence, said that while signaling further improvement across the Filipino manufacturing sector, PMI data from the opening month of the third quarter still painted a picture of a muted overall performance.
“Output and new orders continued to rise, but paces of expansion remained historically subdued. Purchasing and employment also rose at slower rates, reflecting underlying caution among manufacturers,” Baluch said.
“Inflationary pressures were notably muted, providing a silver lining to the otherwise cautious landscape. At the same time, optimism regarding future production levels surged to a four-month high, as firms strategically prepared for anticipated demand. While challenges remain, growing positive sentiment hints at a more hopeful outlook for the sector,” Baluch said.
Production levels rose for a second consecutive month, with the seasonally adjusted index reaching a three-month high.
This was spurred by an increase in incoming orders and partly by a renewed rise in finished goods inventories. These inventories were accumulated in anticipation of future sales, particularly due to front-loading orders from the US ahead of impending tariff hikes, resulting in the strongest expansion of post-production inventories in eight months.
Demand for Filipino manufactured goods improved for the fourth consecutive month in July. Foreign sales also contributed to growth in total new work, albeit fractionally, with new export orders increasing for the first time in five months. However, the rate of increase for overall new orders softened slightly, remaining modest and weaker than the long-run series average.
The softening sales landscape impacted firms’ purchasing and hiring decisions, with both measures recording a slowdown in growth. The observed rates of expansion were broadly similar and only marginal, according to the report.
Inflationary pressures across the Philippines manufacturing sector remained subdued in July. The rate of input price inflation was the slowest in the current 14-month period of rising cost burdens, attributed mainly to higher raw material prices. However, some firms mitigated costs through strategic bulk buying. The rate of charge inflation remained steady and marginal, underscoring the need for firms to limit price hikes amid muted demand.
Confidence on future output strengthened further among Filipino manufacturing firms in July, reaching its highest level in four months.
Firms cited hopes of improved demand conditions and plans for marketing initiatives. However, positive sentiment remained well below the series average.
