The Philippine manufacturing sector returned to growth territory in December 2025 as a recovery in domestic demand helped end a three-month period of contraction, but a persistent slump in exports continued to weigh on the industry.
The S&P Global manufacturing Purchasing Managers’ Index (PMI) climbed to 50.2 in December from 47.4 in November. The reading moved back above the 50-point threshold that separates expansion from contraction, signaling a modest improvement in operating conditions as the year drew to a close.
S&P Global Market Intelligence economist Maryam Baluch said new order volumes rose for the first time in four months, which helped ease an ongoing downturn in production.
The growth in new work was the most pronounced since April, allowing firms to increase purchasing activity at the fastest pace since August to meet the rising intake.
The recovery was led by the domestic market as external demand for Filipino goods worsened. S&P Global noted that a drop in new export orders dampened overall sales growth, highlighting a disconnect between local consumption and global trade.
While new orders improved, production levels fell for a fourth consecutive month, marking the longest sequence of contraction since 2021. Manufacturers managed to stabilize inventory levels after a sharp depletion in November, and some firms began building post-production stocks in anticipation of higher demand in 2026.
Employment conditions remained mixed during the month. Some companies reduced headcount due to lower production requirements while others hired more staff to handle the influx of new orders. This imbalance led to a higher volume of unfulfilled requests for goods as companies struggled to match capacity with demand.
Operating expenses rose slightly as higher material prices pushed up input costs. However, the pace at which firms raised their own selling prices remained modest and stayed below the long-run average.
Local manufacturers expressed optimism regarding output for 2026, citing upcoming projects and business expansion plans. However, confidence levels dipped slightly from a 12-month high recorded in November.
Baluch said the improvement across the sector remains tepid and its sustainability will depend on whether demand can be further bolstered to bring growth back to production. She warned that sharply declining export market conditions pose significant headwinds that could limit broader expansion.
