By Aubrey Rose A. Inosante, Reporter
PHILIPPINE FACTORY ACTIVITY fell sharply in November — the steepest drop in over 4 years — as output and latest orders declined amid weather disruptions.
S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) slumped to 47.4 in November, a reversal from the 50.1 in October.
In a report, S&P Global said this signaled the “strongest deterioration” in operating conditions within the Philippine manufacturing sector for the reason that 46.4 reading in August 2021.
“Output and latest orders contracted at their fastest rates since August 2021, driven by weak customer demand. Exports, purchasing and employment also declined, reflecting broader challenges within the sector,” Trevor Balchin, economics director at S&P Global Market Intelligence, said.
The headline PMI is a composite indicator of producing performance. A PMI reading below 50 indicates an overall deterioration in operating conditions in comparison with the previous month, while a reading above 50 indicates higher operating conditions.
The Philippines was the one country within the Association of Southeast Asian Nations (ASEAN) that saw a deterioration in manufacturing activity in November. ASEAN PMI rose to 53 in November from 52.7 in October, as latest orders and production further accelerated.
Based on S&P ASEAN PMI data, Thailand recorded the very best PMI reading at 56.8, followed by Vietnam (53.8), Indonesia (53.3), Myanmar (51.4), and Malaysia (50.1).
In August, the US began imposing a 19% reciprocal tariff on many goods from the Philippines, Cambodia, Malaysia, Thailand and Indonesia.
S&P Global said Philippine manufacturers saw latest orders drop for a 3rd straight month, and on the fastest rate since August 2021. This was attributed to “weak customer demand and reduced requirements because of product life cycle changes.”
It noted latest export orders fell for the second straight month, and at steepest pace since September 2024.
“Production followed the identical trend as latest orders in November, falling for the third month running and on the fastest rate since August 2021. Many businesses also noted that the typhoon had caused disruptions to business activities,” it said.
S&P Global said the sharp drop in latest orders led to a decline in purchasing activity for a second month in a row. This prompted firms to cut back their inventory for the primary time in five months.
“The speed of destocking was the fastest in only over five years. Meanwhile, suppliers’ delivery times were shortened for the primary time since April 2024, albeit only barely,” it added.
Manufacturers also reduced staff for the primary time since May.
“The general rate of job shedding was only marginal, however the fall was linked to layoffs and the non-renewal of contracts. Backlogs rose for the primary time in three months, and stocks of finished goods were depleted on the fastest rate in nearly a yr,” S&P Global said.
Inflationary pressures were subdued in November, mainly because of lower demand for raw materials.
“Input price inflation eased to a four-month low, remaining well below the long-term trend, while output prices rose barely,” Mr. Balchin said.
Despite the decline in latest orders, manufacturers were confident of output growth over the subsequent 12 months. S&P Global noted that overall sentiment was the strongest since November 2024.
“There have been signs of promise, nevertheless, as manufacturers expressed increased optimism for the subsequent 12 months, anticipating growth because of latest projects and improved economic conditions,” Mr. Balchin said.
“Overall, while the manufacturing sector faces immediate challenges, the outlook suggests cautious optimism for growth moving forward,” he added.
Meanwhile, analysts said the slump in manufacturing activity may be attributed to the typhoons and earthquakes that hit parts of the country in November.
S&P Global Market Intelligence Economics Associate Director Jingyu Pan said the decline in local factory output in November is probably going temporary, driven by severe weather fairly than a broader weakening in demand.
“As we delve into the comments coming through from manufacturers from whom we collect the survey responses, it does appear that the back-to-back typhoons that has hit in November has actually really been quite impactful for the Philippines,” she said in an interview on Money Talks with Cathy Yang on One News on Monday.
The multiple storms that hit the country have slowed demand and disrupted factory operations, she said.
Ms. Pan said she expects factory activity to get well in December because the impact of weather disruptions dissipate.
“Still relatively softer local manufacturing PMI still largely attributed to the weather-related disruptions particularly the spillover effects of the series of storms and earthquakes that reduced working days for some local manufacturers, thereby reducing their production,” Rizal Industrial Banking Corp. Chief Economist Michael L. Ricafort said.
Mr. Ricafort said November is frequently the tail end of seasonal importation and production ahead of the vacation period.
He also noted the peso’s slide to a record low last month raised import costs, though this was partly offset by the Bangko Sentral ng Pilipinas’ recent rate cut.
John Paolo R. Rivera, a senior research fellow on the Philippine Institute for Development Studies, said some firms can have scaled back production because of recent economic uncertainty and the slowdown in government projects.
“Some manufacturers are also adjusting inventories more cautiously as they wait for clearer signals on demand heading into 2025,” he said.
Mr. Rivera warned that the slowdown in manufacturing could proceed in December and early 2026 if business confidence stays weak and the peso stays volatile.
“But a recovery continues to be possible if holiday spending gives a short-term boost and if government spending normalizes soon. Firms will proceed to be cautious until they see stronger, more stable demand and a clearer policy environment,” he said.
Meanwhile, Economy Secretary Arsenio M. Balisacan said the Philippine manufacturing sector continues to grapple with high business costs, particularly because of infrastructure gaps.
“We talked about digital connectivity, but additionally our physical infrastructure, transport, power. We’ve got those challenges. That’s why within the last couple of years, our task was to extend the extent of spending on our infrastructure, particularly quality infrastructure,” he said at a year-end press chat on Monday.
One other hurdle for the federal government is ensuring efficient use of funds, noting that 5-6% of gross domestic product will not be reaching intended projects because of corruption.