THE Philippine manufacturing sector saw conditions improve in January, with output growing for the first time in five months, but the gain could be short-lived given a marked drop in business confidence.
The purchasing managers index (PMI) for the sector hit a nine-month high of 52.9 from 50.2 in December, S&P Global reported on Monday, moving further from the 50.0 mark that separates growth from contraction.
“After a prolonged period of subdued growth in the second half of 2025, the first PMI data release for 2026 points to a marked shift in momentum,” S&P Global economist Maryam Baluch said.
Growth in new orders accelerated and also approximated the rebound in output.
“A renewed and strong uptick in output and faster growth in new orders contributed positively to the increase in the headline figure,” S&P Global said.
“According to anecdotal evidence, strengthening underlying demand trends supported the latest uptick in new sales, which then fed through to a renewed rise in production levels,” it added.
Orders from abroad supported the rise in new orders. The pace of growth was said to be modest but was the first gain since September.
Manufacturers subsequently increased hiring to meet demand, ending a two-month decline. The improvement, while slight, was the fastest since June.
Increased employment led to a reduction in backlogs, which while marginal was also the first drop in three months.
Purchasing activity increased to a pace that was the fastest in 12 months.
Companies also stocked up on raw materials, with inventories rising for the first time in three months, while holdings of finished goods grew for a second straight month.
Input costs rose on average but the increase was marginal overall, which led to minimal price hikes by manufacturers.
“In both cases, the rates of increase were weaker than their respective long-run averages,” S&P Global said.
Delivery times lengthened compared to October, meanwhile, indicating continued supply chain pressures.
What was concerning about the latest PMI survey, however, was the loss in confidence about future output.
“The level of optimism was the second-weakest on record,” S&P Global said, “only surpassing the survey low observed in March 2020.”
While still positive, sentiment was said to have been dampened by economic uncertainty in overseas markets.
“This hesitancy,” Baluch said, “reflects lingering concerns regarding export demand and the sustainability of the latest [PMI] improvement.”