Philippines’ August PMI grows at fastest pace in nearly 10 years

By Justine Irish D. Tabile, Senior Reporter

PHILIPPINE manufacturing activity expanded at its fastest pace in nearly a decade in August, driven by stronger new orders and improved production efficiency, S&P Global said.

The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) improved to 54.9 in August from 51.8 in July. This was the manufacturing sector’s fastest growth since December 2016.

August also marked the fourth straight month of PMI expansion.

A PMI reading above 50 signals an improvement in operating conditions from the previous month, while a reading below 50 shows a deterioration.

“The Filipino manufacturing sector continued to build momentum in August, moving on from the flat performance seen in the previous quarter, when activity was affected by the conflict in the Middle East,” said S&P Global Market Intelligence Economist Maryam Baluch.

At 54.9, the country’s August PMI reading was the highest among selected Southeast Asian economies. It was ahead of Thailand (53.8), Myanmar (50.3), Malaysia (50.2), and Indonesia (49.8).

Citing anecdotal evidence, S&P Global said growth in new orders accelerated to its fastest pace in six months in August, driven by new product and model launches, higher repeat business and a broader customer base.

“Overall new business also received a modest lift from a renewed improvement in international sales, as new export orders for Filipino manufactured goods rose for the first time in six months,” it said.

S&P Global noted that production output rose in August, the fastest since December 2016.

“Improved underlying demand and greater production efficiency were cited by respondents as key factors behind a substantial rise in manufacturing output during August,” S&P Global said.

August data also showed a further rise in input purchases, the fastest in six months.

“Firms responded by increasing both purchasing and hiring to keep up with greater production needs,” said Ms. Baluch.

Inventories rose for the first time since February, although at a moderate pace.

S&P Global said finished goods inventories slipped for a second month in a row as “supplier delays led some firms to draw on existing stocks to meet production requirements, although the rate of depletion remained only marginal.”

Employment rose for the first time in five months, the strongest in 21 months, it said.

Meanwhile, the pace of input-cost inflation eased in August from July, as firms reported higher payments for energy, raw materials and logistics, S&P Global said.

Output charges went up, but at a modest pace and weakest in the last six months, it added.

S&P Global said business confidence surged to its highest level since November 2024.

“Goods producers that forecasted an expansion in output in the year ahead cited expansion plans, the introduction of new product lines, and expectations of stronger inflows of new work and new customer wins,” it said.

Francisco Cid L. Terosa, an associate professor and former dean of the University of Asia and the Pacific School of Economics, partly attributed the faster PMI activity to the global boom in artificial intelligence (AI), which benefited Filipino electronics and intermediate-goods suppliers.

He also cited easing inflationary pressures and expectations of stronger demand in the next few months, which lifted pre-production purchases of raw materials and semi-finished goods and supported job creation.

“I think the recovery is sustainable in the near term, particularly for electronics, which is driven by the global AI and technology boom, and food processing and consumer goods industries,  which are both driven by strong domestic demand,” he said in a Viber message.

If sustained, stronger manufacturing activity could help prevent a deeper economic slowdown, Mr. Terosa said.

“Manufacturing growth can provide a vital buffer for third-quarter gross domestic product as it results in job creation, higher household income, and consequently, consumer spending. It can also constrain manufacturing-related inflationary pressures,” he added.

The Philippine economy grew by 2.3% in the second quarter, a post-pandemic low, in the April-to-June period. That was well below the 5.4% expansion in the same quarter last year and the 2.8% growth in the first quarter.

During the first half, the economy grew by 2.6%, below the government’s 3.5%-4.5% target for the year.

However, Mr. Terosa said that manufacturing growth alone is unlikely to drive a broad-based recovery, as the economy remains heavily reliant on services and consumption.

He said weaknesses in real estate, private construction, and consumer spending could weigh on economic growth.

“The broader economic outlook is still beset by a weak peso, external trade uncertainties, negative repercussions of the Iran war and elevated benchmark interest rates,” he said.

“Hence, a resurgent manufacturing sector can provide cushion for the third, but, on its own, it may not lift the economy out of the doldrums. Manufacturing growth alone may be inadequate to revitalize the sluggish economy,” he added.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the August PMI points to a pickup in business and other economic activity.

The improvement is consistent with strong exports driven by demand for AI-related electronics and semiconductors, as well as the seasonal increase in pre-production purchases ahead of the Christmas period, he said.

“Going forward, local manufacturing performance would be partly a function of catching up National Government spending, especially on infrastructure,” he added.

However, Mr. Ricafort said higher oil, shipping and logistics costs could raise import costs and squeeze manufacturers’ profit margins.