PHILIPPINE FACTORY activity in January expanded at its fastest pace in nine months amid an increase in production and new orders, S&P Global said on Monday.
However, the latest improvement could be short-lived as business confidence remained weak due to concerns about external demand as the global economic environment remains fragile.
S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) rose to 52.9 in January from 50.2 in December, the strongest improvement in nine months or since April’s reading of 53.
A PMI reading above 50 denotes better operating conditions than in the preceding month, while a reading below 50 shows deterioration.
“A renewed and strong uptick in output and faster growth in new orders contributed positively to the increase in the headline figure,” S&P said. “According to anecdotal evidence, strengthening underlying demand trends supported the latest uptick in new sales, which then fed through to a renewed rise in production levels.”
The Philippines recorded the fastest expansion in manufacturing activity in the Association of Southeast Asian Nations (ASEAN) region in January, based on S&P’s ASEAN PMI data, beating Thailand’s 52.7, Indonesia’s 52.6, Vietnam’s 52.5, Myanmar’s 50.9, and Malaysia’s 50.2.
The ASEAN Manufacturing PMI picked up to 52.8 in January from 52.7 in December on the back of strong growth in new orders.
“After a prolonged period of subdued growth in the second half of 2025, the first PMI data release for 2026 points to a marked shift in momentum,” Maryam Baluch, an economist at S&P Global Market Intelligence, said in the report.
“New orders registered a strong and accelerated uptick, supported in part by a renewed rise in export demand,” she added. “As a result, production returned to expansion territory for the first time in five months.”
S&P said the growth in overall orders was backed by a “modest” increase in new factory orders received from abroad, which marked the first month of expansion since September last year.
With these new orders driving production, higher production requirements led to increased staffing levels, snapping a two-month decline in job creation. “Although the pace of expansion was slight, it was the fastest since last June.”
“The recent uptick in employment allowed Filipino manufacturers to reduce backlogs of work at the start of the year. The rate at which work-in-hand contracted was marginal but marked the first reduction in three months.”
Increased output requirements also led manufacturing firms to ramp up their purchasing activity, posting the fastest growth in 12 months, S&P said.
“Additionally, firms highlighted their preference of stockbuilding in January as holdings of inputs rose for the first time in three months. Meanwhile, post-production inventories were also raised and for a second a straight month,” it said.
Meanwhile, producers’ operating expenses rose last month due to higher prices of raw materials, although input price inflation was broadly unchanged from December. This led manufacturing firms to slightly raise their goods’ prices.
Companies also reported longer input lead times in January, showing continued supply chain pressures, S&P said.
WEAK CONFIDENCE
However, despite the higher headline PMI figure in January, Ms. Baluch said the data showed a “worrying” decline in business confidence about future output.
“Overall sentiment slipped to the second-weakest level on record, surpassing only that seen at the onset of the COVID-19 pandemic. This hesitancy reflects lingering concerns regarding export demand and the sustainability of the latest improvement,” she said.
While companies remained hopeful that demand would improve, economic uncertainties in key export markets dampened confidence, S&P added.
S&P Global Market Intelligence Economics Associate Director Jingyi Pan said improved factory activity in the Philippines and across ASEAN to start the year is a “promising sign,” even as worries remain.
“Let us recall that January has been another month where geopolitical concerns have actually spread across the globe. Then, on that end itself, I think that’s something to take note of. But what I think as well that we have seen, as I mentioned, the employment index, there was a renewal and growth of employment. So, the businesses themselves are worried, but they’re still hiring. They are starting to buy inputs again,” she said in an interview on Money Talks with Cathy Yang on One News on Monday.
“If the employment index does not pick up alongside demand, if the stocks of purchases are not picking up, that’s when we are getting a little bit more worried. But I think right now, it’s more of a wait and see… So, from that perspective, I think it is telling us that they are still willing to invest to some extent, even though they are worried about how much production growth could actually materialize in 2026.”
She said they expect industrial production to rebound this year after a weak fourth quarter.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said better weather conditions and less disruption may have contributed to increased production at the start of the year.
He added that further monetary easing here and abroad could provide a boost to manufacturers as lower borrowing costs will help them finance their operations and potential expansion.
Restocking after the holidays and other seasonal factors likely propped up factory activity last month, which means the January high could simply be a “blip,” especially amid the Philippine economy’s dismal performance last quarter, Filomeno S. Sta. Ana III, coordinator of Action for Economic Reforms, said.
“What is most concerning is the slump in business confidence despite the pickup in output in January 2026. That weak business confidence will predict future performance,” he said. — Aubrey Rose A. Inosante
