PHILIPPINE manufacturing growth slowed in March as rising energy costs and uncertainty linked to the Middle East war weighed on demand and output, S&P Global said on Wednesday.
The country’s purchasing managers’ index (PMI) eased to 51.3 in March from February’s over eight-year high of 54.6 and was also the lowest since October 2025’s 50.1.
PMI readings above 50.0 point to growth, while those below are a sign of a contraction.
“The war in [the] Middle East weighed on the performance of the Philippines manufacturing sector, March PMI data showed,” S&P Global economist Maryam Baluch said.
“With [the] vast majority of the country’s oil supply coming from the Gulf countries now under threat, the President (Ferdinand Marcos Jr.) has declared a national energy emergency,” she noted.
New orders continued to increase in March but at a slower pace following the sharp rise recorded in February. The slowdown was said to be partly due to a “fresh decline in new export sales.”
“While the latest downturn was modest, it marked the first month of contraction since last December,” S&P said.
“Firms noted that the war in the Middle East had led to weaker demand from foreign clients,” it added.
In response, firms moderated production levels. Output still expanded, but the pace of growth was much softer than in February and the weakest in the current three-month sequence of expansion.
Manufacturers also cited higher fuel prices and material shortages linked to the Middle East conflict as factors weighing on output.
“In response to easing expansions in output and new orders, Manufacturing production firms broadly paused their purchasing activity in March,” S&P said.
The pause in buying helped ease some pressure on supply chains, although vendor performance continued to deteriorate and delivery times lengthened for a fourth consecutive month due to higher fuel costs and material shortages.
With production still increasing but input deliveries delayed, firms opted to draw down inventories. Stocks of preproduction items declined modestly in March, marking the first drop in four months.
Cost pressures intensified during the month, with higher energy prices — including fuel and gas — and limited material availability pushing operating expenses higher.
S&P noted that the rates of inflation for both input costs and output charges were “historically sharp” in March, reversing from the slight declines seen in the previous month.
“Filipino manufacturers are exposed to shocks in oil and fuel prices rippling through global markets, as signalled via notable hikes in costs and charges, and softer demand conditions,” Baluch said.
“Meanwhile, purchasing activity stalled and output growth and job creation slowed,” she added.
Employment continued to rise for a third straight month but the pace of job creation was marginal and the weakest in the current sequence. Backlogs of work increased at a modest pace as input delays hampered firms’ ability to complete new orders.
Despite the slowdown, manufacturers remained optimistic about the outlook. Confidence regarding output over the next 12 months improved to a four-month high, with firms hopeful that demand conditions would strengthen and support growth.
“The duration and intensity of the war will directly impact the sector’s trajectory in the coming months, as inflationary pressures constrain sales and pricing power,” Baluch said.