PH manufacturing growth hits strongest pace since 2016

Philippine manufacturing accelerated sharply in August as stronger demand drove increases in factory output, new orders, hiring and business confidence, with sector activity reaching its strongest pace since December 2016, according to the latest Purchasing Managers’ Index (PMI) data from S&P Global Market Intelligence.

The Philippines Manufacturing PMI rose for the fourth consecutive month to 54.9 in August from 51.8 in July. A reading above 50 indicates an expansion in manufacturing activity.

The August reading marked the strongest improvement in the sector’s operating conditions since December 2016, as manufacturers responded to stronger underlying demand and improved production efficiency.

“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 Maryam Baluch, economist at S&P Global Market Intelligence.

Factory output rose substantially during the month, with the pace of growth accelerating to its fastest since December 2016. Manufacturers cited stronger demand and greater production efficiency as key drivers.

New orders also increased at their fastest pace in six months, supported by new product and model launches, higher repeat business and a broader customer base. New export orders likewise returned to growth for the first time in six months, providing an additional lift to overall demand.

Stronger order books prompted manufacturers to increase their purchases of inputs. Input buying accelerated to a six-month high as companies responded to rising production requirements.

Manufacturers also increased their stocks of purchased inputs for the first time since February, although the buildup remained moderate. This came despite a marked deterioration in supplier performance.

Finished-goods inventories, meanwhile, declined for a second consecutive month. Supplier delays prompted some manufacturers to draw on existing stocks to meet production requirements, although the rate of depletion remained marginal.

Employment conditions also improved in August, with manufacturers increasing staffing levels for the first time in five months.

While job creation remained modest, the pace was the strongest in 21 months, suggesting that stronger demand was beginning to translate into additional hiring.

Price pressures eased during the month. Input-cost inflation slowed notably from July, although manufacturers continued to report higher expenses for energy, raw materials and logistics.

Selling prices also increased, but only modestly, with the rate of output-price inflation slowing to its weakest pace in the current six-month period of rising prices.

Business confidence surged in August to its highest level since November 2024.

Manufacturers expecting output to increase over the coming year cited expansion plans, new product lines, stronger inflows of new orders and expectations of winning new customers.

The combination of stronger new orders, faster output growth, renewed hiring, easing cost pressures and rising business confidence points to a broad-based strengthening of the Philippine manufacturing sector as the third quarter progresses.

Still, the PMI reflects improving business conditions rather than a measure of actual manufacturing output or GDP growth, making the August surge an encouraging indicator of momentum rather than proof of a broad economic recovery.