By Justine Irish D. Tabile, Senior Reporter
PHILIPPINE factory activity contracted for a second straight month in October as manufacturers cut output and new orders declined, S&P Global said.
The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) declined to 49.1 in October from 49.6 in September.
This was the weakest reading in six months or since April’s 48.3 and marked a reversal from the 50.1 reading in October 2025.
A PMI reading below 50 signals a deterioration in operating conditions from the previous month, while a reading above 50 signals an improvement.
S&P Global noted that October marked the third time this year that the sector’s health deteriorated.
The Philippines had the second-lowest PMI reading among selected Association of Southeast Asian Nations (ASEAN) economies in October, only higher than Myanmar’s PMI which fell to 47.6 from 49.1 in September.
The Philippines’ PMI was also below the average ASEAN manufacturing PMI of 53.1 in October, improving from 52.1 in September and signaling a faster improvement in regional operating conditions.
Thailand posted the highest PMI at 54.8 in October (from 54.3 in September), followed by Indonesia at 54.0 (from 52.4), Vietnam at 52.3 (from 51.9) and Malaysia at 51.0 (from 49.9).
“Although declines in output and new orders remained modest, the sharper fall in purchasing activity and further job losses suggest manufacturers remain cautious amid subdued demand,” S&P Global Market Intelligence Principal Economist Siân Jones said.
S&P Global said that output declined at a slower pace in October, while the contraction in new orders worsened.
“Some firms cited that weak demand and the current hot weather, linked by some panelists to El Niño, weighed on the two main contributors to the headline PMI index,” it said.
Demand was weak for both domestic and overseas orders, S&P said, adding that new export orders continued to drop in October.
“However, with production requirements down, buying activity was curbed to a greater extent in October. The latest decrease was strong and the fastest for 11 months,” it said.
S&P Global said October data showed a “steady” picture for pre-production inventory, after the reduction in September.
“One reason some firms sought to expand their holdings was the expectation that production will pick up in the coming months,” it said.
Employment declined for a second straight month in October, mostly due to resignations. Despite a smaller workforce, firms noted that backlogs fell at “sustained and modest pace” for a second straight month.
Suppliers’ delivery times lengthened for the 11th straight month, with respondents citing material shortages that delayed deliveries and led to changes in schedules.
Price pressures eased in October, with input costs rising at the slowest pace in eight months.
“However, where costs increased, this was linked to higher material prices, which were then passed on to customers,” S&P Global said.
CONFIDENCE RISES
Despite weaker operating conditions, manufacturers’ confidence rebounded to a near two-year high in October on expectations of stronger demand.
“A rebound in business confidence to a near two-year high nevertheless offers some encouragement, with firms anticipating that new projects and customers will support production growth over the coming year,” Ms. Jones said.
However, she noted that stronger confidence had yet to result in a recovery in new orders or employment.
“The Bangko Sentral ng Pilipinas’ latest 50-basis-point rate increase, taking its policy rate to 5.5%, could further restrain demand and investment through higher borrowing costs,” she said.
Philippine Institute for Development Studies President Philip Arnold P. Tuaño said weak demand remained the main factor behind the continued softness in Philippine manufacturing.
“Domestic demand remains relatively subdued as the Philippine economy enters the fourth quarter,” he told BusinessWorld in a Viber message.
“The continued decline in new orders indicates that manufacturers have yet to experience a sustained improvement in demand for their products,” he added.
Rizal Commercial Banking Corp. Chief Economist Michael Ricafort said the decline in factory activity reflected the economic impact of the ongoing war in the Middle East.
He said elevated oil prices and inflation had raised manufacturers’ production costs, while minimum wage hikes and higher interest rates added to labor and financing expenses.
A weaker peso also drove up import costs, while slower global and domestic growth weighed on spending and demand, he added.
“For the coming months, a Super El Niño drought especially up to early 2027 could be a potential headwind for local manufacturing activities,” Mr. Ricafort said, pointing to the risk of lower agricultural output and higher food and input prices.
Still, he said record exports amid strong global demand for electronics and artificial intelligence-related products would remain a bright spot for some manufacturers and the Philippine economy.