Philippine manufacturing activity softens in February
Slowed growth in new orders and production led to a modest increase in purchasing
Manufacturing activity in the Philippines has dipped for the second straight month in February, dropping to 51.0 from the previous month's 52.3, an S&P Global survey said.
Whilst manufacturing conditions have improved in the last 18 survey periods, the increase represents only a modest improvement in the health of the Philippine manufacturing sector—its weakest in nearly a year.
A closer look at the underlying figures presents a mixed outlook, with the sector easing slightly, as growth in new orders and production slowed. This led to a more modest increase in purchasing activity.
On a positive note, the ongoing growth in new orders prompted manufacturers to raise employment levels for the first time in three months.
Cost pressures also lessened, with inflation rates for charges nearly stagnating during this latest reporting period.
This modest enhancement in the manufacturing environment was driven by a further uptick in demand trends and a rise in new orders. However, after experiencing robust growth in the last quarter of 2024, the rate of new order expansion once again moderated, with February marking the weakest growth in new factory orders in seven months. Additionally, new export orders also saw a decline.
This cooling demand resulted in a moderation of production expansion; output growth in February was the slowest since July 2024. Responding to the decreased demand and production needs, manufacturers also slowed their purchasing activity, with data revealing the slowest rate of buying in a 15-month growth sequence.
Despite these trends, there was pressure on capacity as firms reported an increase in backlogged work for the first time in five months, indicating that whilst the rate of accumulation was modest, it was the highest seen in nearly two years. Consequently, manufacturers utilised their existing inventories to fulfill order needs, resulting in a reduction of input stock holdings—the first decrease observed in three months.
Moreover, Filipino goods producers experienced a slight increase in employment during February. Although this rise was minor, it came after a two-month period in which staffing levels remained relatively unchanged.
On the cost front, demand trends continued to cool, coinciding with a further easing of cost pressures. Despite material shortages and transportation costs pushing up input prices, the rate of increase was the lowest in the last nine months. At the same time, inflation on charges moderated in February, leading to only a slight rise in output prices for Filipino goods, the slowest in ten months. Both input price and output charge inflation also fell below their historical averages.
Looking forward, Philippine manufacturers remain optimistic about the production outlook over the next year. Many expressed hope that demand would continue to improve, particularly anticipating a boost from the upcoming elections. Nonetheless, confidence levels have slipped to a ten-month low.
"Robust growth observed from the end of the previous year into the beginning of this year waned in February, as the latest survey data indicated slower expansions in output and new orders. Nonetheless, for the first time in three months, employment levels rose, with companies challenged to meet sustained demand improvements, as indicated via a fresh rise in backlogs," said Maryam Baluch, an economist at S&P Global Market Intelligence.
She remarked that easing inflationary pressures might encourage the central bank to loosen its monetary policy which could enhance weakened business confidence and further stimulate new order growth.
