PHILIPPINE manufacturing activity contracted in September as weaker demand and stronger international competition weighed on production and new orders.
S&P’s Global Philippines Manufacturing Purchasing Managers’ Index (PMI) fell to 49.6 from the near 10-year high of 54.9 in August, falling below the 50.0 threshold that separates expansion from contraction.
It was the first deterioration in manufacturing operating conditions since April 2026’s 48.3.
S&P said that the downturn was broad-based, with output, new orders, employment and input buying all returning to contraction territory.
“Filipino manufacturers reported a notable impact from high oil prices, strong international competition and weak demand during September,” said Sian Jones, principal economist at S&P Global Market Intelligence.
Production declined for the first time in nine months, with the pace of contraction said to be the sharpest since November 2025.
Firms attributed the reduction in output mainly to “reduced new order inflows and international competition.”
The decline in new orders came after four consecutive months of expansion. While the contraction in new sales was only marginal, it nevertheless represented a reversal from the improvement seen through the previous four months.
New export orders also returned to contraction in September, with manufacturers reporting that higher prices discouraged purchases amid strong competition.
Jones said that firms also reduced input buying and inventories, signaling a more defensive approach to production.
Despite the weaker demand environment, manufacturers raised their selling prices at a faster pace in September as firms sought to pass higher costs on to customers and protect their margins.
The pace of selling-price inflation accelerated from August even though the increase in overall input costs moderated.
“Greater operating expenses were linked to unfavourable exchange rate movements against the US dollar and higher oil prices,” S&P said.
Manufacturers responded to the difficult operating environment by raising selling prices more sharply, potentially adding further pressure to customer demand.
“The viability of continuing to absorb hikes in costs will be an important consideration in the coming months in bids to drive customer demand,” Jones said.
The weaker order environment also reduced pressure on manufacturers’ capacity.
Backlogs of work declined in September, with the contraction the fastest since April, although the reduction remained marginal.
Lower production requirements also prompted manufacturers to resume cutting jobs. Employment returned to contraction, although the pace of job shedding was described as slight.
Manufacturers likewise reduced their purchasing activity. Input buying fell for the first time since May, while both pre- and post-production inventories declined during the month.
Post-production inventories recorded their fastest decline in five months, suggesting that firms were drawing down stocks as production and demand weakened.
This led manufacturers to become less confident about their prospects over the next 12 months.
While firms continued to expect output to increase over the coming year, optimism dropped significantly from August’s 21-month high and fell to its weakest level since January.
“Manufacturing firms were less certain in the year-ahead outlook, meanwhile, due to concerns regarding pricing power against international competition,” Jones said.
