Amid the deepening probe into the infrastructure corruption scandal, the Philippine manufacturing sector posted its steepest decline in more than four years in November, with both output and new orders contracting at their fastest pace in more than three years.
S&P Global Market Intelligence reported on Monday, Dec. 1, that the Philippines’ manufacturing purchasing managers’ index (PMI) slipped to 47.4 in November, reversing the 50.1 in October and marking the sharpest decline in operating conditions for the country’s manufacturing sector since August 2021. A score below 50 signals contraction, while a reading above 50 indicates expansion.
“The drop in the headline figure was reflected in all five components, with new orders and output having the greatest negative influences,” S&P Global noted.
“I think that we should not again be distracted by what we are seeing at the moment. We know what’s ailing our industry, our manufacturing, and that is the cost of doing business, particularly in the quality of our infrastructure,” said Department of Economy, Planning, and Development (DEPDev) Secretary Arsenio M. Balisacan during a press chat on Monday, Dec. 1, when sought for comment.
Balisacan pointed to a challenge in the quality of government spending, saying that, “it turns out that five to six percent of GDP [gross domestic product] may not be going to the projects that we intended,” referring to the public infrastructure program under the Marcos Jr. administration’s “Build Better More (BBM).”
“So the competitiveness issue has been quite a long-term issue coming from various fronts, not just one factor. And, in fact, it affects not just manufacturing; it also affects our agriculture, it affects our services sector as well,” he added.
S&P Global also reported that exports, employment, purchasing, and inventories declined.
“New orders placed with manufacturing firms in the Philippines fell for the third month running, and at the fastest rate since August 2021. Lower orders were attributed to weak customer demand and reduced requirements due to product life cycle changes. Meanwhile, new export orders fell for the second month running and to the greatest extent since September 2024,” it added.
S&P Global emphasized that production mirrored the downturn in new orders in November, declining for a third straight month and at the quickest pace since August 2021. Several firms also reported that recent typhoons disrupted their operations and hampered business activity.
It added that, “Reduced new orders influenced demand for inputs in November,” with purchasing activity falling for a second straight month—the first such back-to-back drop in over four years. The decline led to the first drawdown of input stocks in five months and the fastest pace of destocking in just over five years.
S&P Global added that suppliers’ delivery times improved slightly for the first time since April 2024.
“With new orders falling solidly, manufacturers shed staff for the first time since May in November,” it added. The overall drop in employment was slight, but firms attributed it to layoffs and non-renewal of contracts. Backlogs increased for the first time in three months, while inventories of finished goods fell at their quickest pace in nearly a year.
“Output and new orders fell as bad weather disrupted business activities,” said First Metro Investment Corp. (FMIC) in a commentary, noting that, “The Philippines had Asia’s worst reading for last month. And in Southeast Asia, it was the only country where manufacturing activity dropped.”
“Powerful typhoons Kalmaegi (Tino) and Fung-Wong (Uwan) battered the Philippines in November, killing more than 200 people and displacing over a million in a country where allegations of corruption in flood-mitigation projects have sparked protests and broad uncertainty,” it noted.
But “while its neighbors also saw storm disruptions, their factories enjoyed robust demand both from their domestic and export markets,” it pointed out.
Despite the continued decline in new orders, S&P Global noted that Philippine manufacturers grew more optimistic about business conditions over the next 12 months.
“Overall sentiment was the strongest since November 2024. Firms expect higher future output mainly due to anticipated new projects, increased orders, economic development, new customers and aggressive marketing. Recovery hopes and business expansion plans also supported optimism towards future performance,” it added.
S&P Global also noted that inflationary pressures stayed relatively subdued in November. Weak demand for raw materials led to the slowest rise in input costs for Philippine manufacturers in four months, well below the long-term trend. While output prices increased after falling in October, overall inflation remained modest.
“There were signs of promise, however, as manufacturers expressed increased optimism for the next 12 months, anticipating growth due to new projects and improved economic conditions. Input price inflation eased to a four-month low, remaining well below the long-term trend, while output prices rose slightly,” said S&P Global economics director Trevor Balchin. “Overall, while the manufacturing sector faces immediate challenges, the outlook suggests cautious optimism for growth moving forward.”
