The Philippine manufacturing sector showed tentative signs of recovery in December as activity returned to expansion territory, signaling improving demand conditions after a volatile fourth quarter.
Latest Purchasing Managers’ Index (PMI) data showed the Philippines Manufacturing PMI rising to 50.2 in December from 47.4 in November, crossing the crucial 50.0 threshold that separates contraction from expansion.
The rebound marked a modest but meaningful improvement in overall sector health following November’s sharp deterioration.
Stronger demand conditions underpinned the turnaround.
New orders increased for the first time since August, snapping a three-month contraction streak. While growth in new work remained subdued, it was the strongest pace recorded since April, prompting manufacturers to resume purchasing activity.
Domestic demand led the improvement, as external conditions remained challenging.
Foreign demand continued to weigh on the sector, with new export orders posting their steepest decline in 15 months. The sharp drop offset some of the gains from the domestic market, underscoring lingering global headwinds for Philippine manufacturers.
Production volumes remained in contraction during December, though the pace of decline eased. This marked the fourth straight month of falling output, the longest downturn since 2021.
Employment also stayed in negative territory, but job losses softened, pointing to early stabilization in the labor market as firms cautiously prepared for a potential demand rebound.
Input buying rose at the fastest rate since August, helping firms stabilize inventories after steep drawdowns in November.
As new orders began to outstrip production capacity, backlogs of work increased again, suggesting mounting operational pressures if demand continues to firm.
Cost pressures showed further signs of easing. Input price inflation slowed to its weakest level in 19 months, although manufacturers continued to pass on higher raw material costs through modest increases in selling prices.
Manufacturers expect output to rise in 2026, supported by new projects, product launches, and expansion plans. While overall business confidence softened slightly, the return to expansion in December offers cautious optimism that the sector may be turning a corner as the new year begins.
