Philippine manufacturing PMI shrinks for the first time in 5 months

By Justine Irish D. Tabile, Senior Reporter

PHILIPPINE FACTORY activity contracted for the first time in five months in April amid a sharp decline in new orders, S&P Global said on Monday.

The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) slumped to 48.3, a reversal from 51.3 in March, reflecting a “moderate deterioration in operating conditions.”

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

“The Philippine manufacturing sector started the second quarter of 2026 with a renewed worsening of operating conditions as the headline index fell below the neutral 50 reading for the first time in five months,” Maryam Baluch, an economist at S&P Global Market Intelligence, said in a report.

April marked the first contraction in PMI since the 47.4 reading in November 2025.

Aside from the Philippines, Indonesia (49.1) was the only other Association of Southeast Asian Nations (ASEAN) member that saw a contraction in PMI in April.

In contrast, Malaysia had the highest PMI (51.6), followed by Myanmar (50.9) and Vietnam (50.5).

For the Philippines, S&P Global said new orders declined rapidly, while production stalled.

According to S&P, the decline in new orders was the steepest since August 2021.

“Total new sales were also weighed down by a deteriorating export market demand picture,” said Ms. Baluch.

Philippine manufacturers reported that new export orders fell at a “notably accelerated and rapid pace” in April, as closed trade routes resulted in a pause in shipments and created hesitancy among customers.

S&P Global said this was the steepest decline in new export orders since mid-2020, at the height of the pandemic lockdowns.

“Total new sales were also weighed down by a deteriorating export market demand picture,” Ms. Baluch said.

Manufacturing firms also saw sluggish production levels in April.

“Production levels stagnated, and firms made cuts to purchasing and hiring activity as they grappled with high costs, often said to be feeding through from the war in the Middle East,” Ms. Baluch added.

Input price inflation accelerated to its fastest pace since December 2022, which firms attributed to higher energy and shipping costs linked to the war in the Middle East.

“Costs were largely passed on to clients through a sharp and stronger rise in factory gate charges. The rate of selling price inflation was the quickest in 41 months,” S&P Global said.

Manufacturers saw a drop in buying activity for a second month in a row in April, as they turned to inventories to meet production requirements. This led to the biggest reduction in pre-production inventories since 2020.

S&P Global noted that rising costs drove manufacturers to slash staffing numbers. This marked the first decline in hiring activity this year.

Despite a drop in employment, Philippine firms reported lower backlogs amid a sharp reduction in new orders.

“Looking at supply chains, April marked a further deterioration in vendor performance. Average lead times for inputs lengthened solidly. Longer delivery times were widely linked to the war in the Middle East,” S&P Global said.

Despite the challenges, manufacturers reported stronger business confidence, underpinned by hopes of a growing client base and improving demand.

“Manufacturing firms in the Philippines expect to shake off current woes, as confidence for the year ahead rose to a 17-month high,” Ms. Baluch said.

Francisco Cid L. Terosa, an associate professor and former dean of the School of Economics of the University of Asia and the Pacific, said that the manufacturing decline in April reflects the adverse impact of the Middle East conflict.

“The flow of key manufacturing inputs like petroleum products and by-products, liquefied natural gas, and the like was clearly disrupted by the ongoing crisis,” Mr. Terosa said in a Viber message.

“If the conflict persists, I expect the deterioration of the PMI to deepen and the growth prospects of the manufacturing sector to dim,” he added.