The Market Monitor Minding the Nation's Business
The Philippine manufacturing sector experienced a significant slowdown in May 2025 as output declined and new orders weakened, according to the latest data from S&P Global Philippines. This came despite inflation remaining relatively stable.
The sector’s Purchasing Managers’ Index (PMI) dropped to 50.1 in May from 53.0 in April, barely hovering above the 50.0 mark that separates expansion from contraction. The decline marks the first drop in 19 months, following a brief rebound in April after dipping to 49.4 in March.
“The promising growth observed at the beginning of the second quarter signaled a notable cooling in May,” said Maryam Baluch, economist at S&P Global Market Intelligence.
While new orders continued to rise, the report noted the growth was sluggish and overshadowed by declines in output, employment, and inventories of both raw materials and finished goods.
Baluch also cited weakening foreign demand, with new export orders falling for the first time since March. Though the decline was described as “fractional,” it was the sharpest contraction since November 2024.
“As global trade tensions escalate, the outlook for overseas demand appears increasingly precarious,” Baluch warned. The report noted a corresponding dip in input purchases, with growth at its weakest in 18 months, as manufacturers scaled back spending due to slower orders.
Manufacturers also faced longer lead times in acquiring materials. Despite some increase in purchasing activity, supply levels were depleted for the first time in three months.
Adding to the concern, the sector posted a fresh decline in workforce numbers—the first in four months—with the rate of job losses at its highest in 11 months. Respondents cited voluntary resignations and unfilled vacancies as contributing to the dip in employment, leading to increased backlogs amid manpower shortages.
Despite the gloomy indicators, inflationary pressures remained historically weak, though they slightly intensified. Cost and output inflation reached their highest levels since January, but were still described as modest overall.
“On a brighter note, inflationary pressures remain modest and historically subdued, which could play an important role in supporting demand moving forward,” Baluch concluded. “The stability of price pressures may also provide a necessary buffer against the challenges posed by a cooldown in new orders and external market uncertainties.” TRACY CABRERA