Philippine manufacturing closed 2025 on a steadier note, as factory activity clawed its way back into expansion territory in December, buoyed largely by a revival in local demand rather than a turnaround in global markets.
Data from a monthly survey of roughly 400 manufacturers showed the country’s purchasing managers’ index rising to 50.2 in December from 47.4 in November, marking the sector’s first expansionary reading in four months.
The survey, compiled by S&P Global, indicated that conditions improved modestly after November’s sharp contraction, which had dragged activity to its weakest level in four years.
The December reading was also the strongest since August and, while only marginally above the 50-point threshold that separates growth from contraction, it suggested that the industry had stabilized after a prolonged slump in orders and production.
Momentum came primarily from the domestic market. Manufacturers reported an uptick in new orders for the first time since late summer, reversing three consecutive months of decline. With demand showing signs of life, firms cautiously resumed purchasing inputs, easing the aggressive cutbacks seen in previous months.
Inventory levels reflected this shift, as stocks of raw materials stopped shrinking while finished goods inventories rose, a move companies attributed to preparations for future demand.
Despite the improvement in orders, factory output itself remained under pressure. Production fell for a fourth straight month, extending the longest downturn since 2021, underscoring the fragility of the recovery.
Employment trends also remained soft, with manufacturers continuing to trim headcount, although the pace of job losses slowed, hinting at tentative labor market stabilization.
External demand continued to weigh heavily on the sector. Export orders contracted sharply in December, posting their steepest decline in more than a year and offsetting some of the gains from the domestic market.
The weak export performance reinforced concerns that the rebound may lack staying power in the absence of a broader global recovery.
Maryam Baluch, economist at S&P Global Market Intelligence, said the sector was still contending with significant challenges despite the improved headline figure. She noted that growth remained uneven and heavily reliant on local demand, with overseas markets offering little support.
Without a sustained recovery in demand strong enough to translate into higher production, the recent improvement could prove short-lived.
Local economists echoed that caution. Leonardo Lanzona of Ateneo de Manila University said part of the December rebound may be seasonal, driven by holiday spending and remittance inflows rather than a structural shift in manufacturing performance.
He warned that global changes in industrial supply chains and production standards pose longer-term challenges that the Philippines must address if it wants to turn brief upswings into durable growth.
The December data suggest that while Philippine manufacturing avoided ending the year on a low note, the sector’s recovery remains tentative.
For now, resilience is coming from within the domestic economy, leaving manufacturers exposed should consumer demand soften or external headwinds intensify in the months ahead.