The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) dropped below the 50.0 growth threshold in September for only the third time in over four years, signaling a slight contraction in the sector.
The headline PMI, a single-figure composite indicator, fell to 49.9 in September from 50.8 in August. A reading below 50.0 indicates contraction.
The decline was led by fresh contractions in both output and new orders, marking the first drop in sales since March amid reports of fewer customer numbers.
Weaker operating conditions were mainly attributed to a renewed, albeit marginal, drop in new order intakes in September, the first decline in six months. However, order books from foreign clients continued to improve, suggesting the downturn was largely centered on the domestic market.
Reduced sales led Filipino manufacturers to scale back production, ending a three-month sequence of expansion. Panelists also cited poor weather and import restrictions on rice as factors negatively impacting output.
Despite the drop in demand, manufacturers increased their purchasing activity and added to input stocks. Post-production inventories of finished goods fell as companies worked to reduce backlogs, which dropped for the first time since April.
The survey also pointed to a subdued jobs market in September.
Cost burdens eased since August but the pace of increase was still among the highest recorded in 2025 so far. Against this, factory gate prices rose only marginally, S&P Global said in a statement. Firms noted that rising material prices were the primary factor behind heightened costs.
Manufacturers remained optimistic about the production outlook for the coming year. Although easing slightly from August, the level of business confidence was the second-highest since last November, with firms generally confident of an improvement in sales.
“The Philippines PMI survey data showed the manufacturing sector moving into negative territory at the end of the third quarter which, despite indicating only a fractional decline, has been highly unusual in the sector’s post-pandemic history,” said David Owen, senior economist at S&P Global Market Intelligence.
“New orders and output decreased slightly, as firms mentioned a fall in client numbers and a modest drop in production from the suspension of rice imports,” Owen said.
“However, with overall sentiment in the year-ahead remaining upbeat in September, and purchasing quantities increasing, manufacturers appear hopeful that the dip in sector performance is temporary,” he said.
