Manufacturers remain upbeat despite March dip in factory output

Manufacturers in the Philippines are showing stronger business confidence for the year ahead, even as factory activity declined in March, according to the latest S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) report released last week.

S&P Global noted that business sentiment last month was the most positive since December 2024, with manufacturers expressing optimism that demand will rebound in the coming months. Many firms are banking on upcoming projects and expanding client bases to drive growth.

“Nonetheless, businesses remain optimistic in their year-ahead production forecasts, with confidence levels at a four-month high. Optimism was reflected in firms’ decisions to maintain their purchasing activity and build stocks,” said Maryam Baluch, economist at S&P Global Market Intelligence.

Despite the upbeat outlook, the country’s manufacturing PMI slipped to 49.4 in March — below the neutral threshold of 50 and signaling a downturn in manufacturing conditions. This marked the first contraction in the sector since August 2023, and was a drop from the 51.0 reading posted in February.

A PMI reading above 50 indicates growth in the manufacturing sector, while a score below 50 denotes contraction.

Baluch explained that the decline in March was driven by reduced new orders due to rising competition and a shrinking client base. “Panelists noted that growing competition and fewer clients led to a reduction in new orders, with output scaled back as a result. The growth in new export orders seen previously also dissipated, with March data signaling a marginal drop in new business from overseas,” she said.

Employment in the sector held steady last month, while inflationary pressures remained modest and under control, according to the report.