THE Philippine manufacturing sector has slipped into ‘negative territory’ for the first time since March as goods producers saw fresh drops in output and new orders, according to the S and P Global Market Intelligence.
The country’s Purchasing Manager’s Index (PMI) score plunged to 49.9 in September from 50.8 in August. The country’s PMI score in September was the lowest since the 49.4 PMI score in March.
‘While signaling just a fractional deterioration in the health of the manufacturing sector, this was only the third time in just over four years where the headline index has been in contraction territory,’ S and P Global said.
S and P Global said ‘weaker operating conditions’ were mainly attributed to a ‘renewed’ drop in order intakes in September.
It also noted that the decline in sales was the first in six months, as surveyed businesses noted lower customer numbers.
However, S and P Global pointed out that order books with foreign clients continued to improve, signaling that the ‘downturn’ was mainly centered on the domestic market.
As such, it said that reduced sales volumes led Filipino manufacturers to scale back production at the end of the third quarter, which ended a three-month sequence of expansion.
Meanwhile, David Owen, Senior Economist at S and P Global Market Intelligence, explained that the Philippines PMI survey data moving into negative territory at the end of the third quarter ‘has been highly unusual in the sector’s post-pandemic history.’
‘New orders and output decreased slightly, as firms mentioned a fall in client numbers and a modest drop in production from the suspension of rice imports,’ added Owen.
‘However, with overall sentiment in the year-ahead remaining upbeat in September, and purchasing quantities increasing, manufacturers appear hopeful that the dip in sector performance is temporary,’ he added.
Philippine economists pointed to Washington’s tariff policy as partly the culprit behind the country’s manufacturing sector entering into contraction mode.
Ateneo De Manila University (ADMU) economist Leonardo A. Lanzona, Jr. said ‘this has to do with the poor performance in exports.’
‘I think this has to do with the poor performance in exports. Manufacturing is significantly linked with exports. Hence, given the global headwinds, particularly with Trump’s unconventional policies, exports are down, bringing down manufacturing as well,’ Lanzona told the BusinessMirror in a Viber message on Wednesday.
Data from the Philippine Statistics Authority (PSA) showed that export earnings growth slowed in August as outbound shipments only grew 4.6 percent to $7.06 billion in August from the $6.75 billion in the same period last year.
It may be noted that after peaking at 26.9 percent in June 2025, export earnings slowed to 17.6 percent in July and posted single-digit growth in August.
Rizal Commercial Banking Corporation (RCBC) Chief Economist Michael L. Ricafort said the contraction in the Philippine manufacturing sector could be largely attributed to the weather-related disruptions, particularly the series of storms and flooding which he said reduced working days for some local manufacturers.
Ricafort added this could also partly be due to US President Donald Trump’s higher tariffs that could reduce demand for exports from other countries, trade wars, and other protectionist measures ‘that led to some wait-and-see attitude for some exports from the country and also exports in the global supply chains in terms of more cautious stance on their production and capacity.’