Philippine factory growth contracted for the first time since August 2023—also the steepest decline in nearly four years—due to the worsening health of domestic manufacturing since the start of the year.
“Following 18 successive months of growth, the Filipino manufacturing sector slipped back into contraction at the end of the first quarter of 2025,” S&P Global said in its latest purchasing managers’ index (PMI) report, released Wednesday, April 2.
According to S&P Global’s report, the Philippines’ PMI fell below the neutral 50 mark in March, marking the first time in one year and seven months.
The country’s PMI, which measures the performance of the manufacturing sector, declined for the third straight month, clocking in at 49.4, down from 51 in February.
S&P Global noted that this was also the steepest downturn since August 2021, when the sector posted a similar index.
S&P Global likewise noted that March’s PMI marked the second time in over three-and-a-half years that the PMI posted a below-50 reading—the first time was August 2023’s 49.7.
Last month’s index signaled lower demand for new orders, thus a reduction in production.
“Foreign client demand also faltered, with the previous three-month period of growth ending in March,” S&P Global said, adding that local firms stopped hiring new employees because they already had enough staff to handle their work.
Maryam Baluch, economist at S&P Global Market Intelligence, said the Filipino manufacturing sector showed signs of worsening conditions in March. “Furthermore, the health of the sector worsened at the strongest pace since August 2021,” she stressed.
Baluch said that “a 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.”
Despite this, businesses are still optimistic about production in the year ahead, with confidence reaching a four-month high.
“Optimism was reflected in firms’ decisions to maintain their purchasing activity and build stocks. At the same time, inflationary pressures remained relatively contained and subdued in the context of the series history,” Baluch said.
Faster factory price hike
Meanwhile, factory gate prices rose at a faster pace in February due to the quicker increase in the prices of coke and refined petroleum products, the Philippine Statistics Authority (PSA) reported also on Wednesday.
Preliminary data from the PSA revealed that the producer price index (PPI), which reflects the year-on-year increase in prices of manufactured goods, posted a 0.8-percent hike, a hairline faster than the 0.7 percent seen in January.
Factory gate prices saw a 1.4-percent decline in February last year.
This year’s relatively faster hike was mainly driven by a faster annual growth in the wholesale prices of coke and refined petroleum products, which increased by nearly three percent, up from nearly two percent in January 2025.
Specifically, the annual growth of prices seen in February was primarily driven by the manufacture of computer, electronic, and optical products; coke and refined petroleum products; and basic metals.
Meanwhile, factory gate prices fell by 0.2 percent month-on-month, but slower than the 0.4-percent drop in January. It also decreased by 0.4 percent in February a year ago.
According to the PSA, the main driver for the slower decline in the sector’s monthly PPI was the manufacture of food products, which saw a modest 0.05-percent increase, reversing the 1.2-percent decrease in the previous month.