On a Tuesday in early November, the latest survey of Philippine factories settled at 49.1, a quiet reading that nonetheless marks a second straight month of contraction. Across the archipelago, manufacturers are holding back, their orders softening under a combination of cooling demand, scorching El Niño weather and a central bank that has just made borrowing more expensive. Yet beneath the numbers lies a mood of cautious hope, as firms have grown more confident about the year ahead even while their purchases and payrolls have yet to follow. Whether that optimism becomes real production or rem
Philippine Factory Activity Contracts for Second Straight Month as Weak Demand Persists
A US-based Climate Impact Lab warning projects 6,500 heat-related deaths in the Philippines through February 2027 amid El Niño.
Optimism has yet to translate into a recovery in orders or hiring.
Mark
So the index is 49.1. That's barely under 50. Why does it matter?
Mimi
Because 50 is the dividing line, and this is the second month below it. September was 49.6, so the slide deepened a little. It's also the third dip this year.
Mark
What's pulling it down?
Mimi
Weak demand mostly, at home and abroad, since export orders fell too. Firms also cited hot weather from El Niño.
Luke
Worth being careful there. The heat is what firms cited, according to the survey. The report doesn't measure how much of the decline it caused.
Mark
Fair. And the 6,500 heat-related deaths figure?
Mimi
That's a projection from the US-based Climate Impact Lab for the period through February 2027. It's a warning about the El Niño, not something the factory survey found.
Luke
Right, one group's estimate, and it sits alongside the PMI rather than being part of it.
Mark
There's a hopeful note too, isn't there?
Mimi
Business confidence hit a two-year high. Firms expect new projects and customers to lift production over the next year. Finished-goods stocks even grew for the first time in four months.
Luke
But Jones says that optimism hasn't yet shown up in orders or hiring. Confidence is an expectation, not a result.
Mark
And the rate hike?
Mimi
The BSP raised its rate by 50 basis points to 5.50 percent. Jones says that could further restrain demand and investment.
Luke
Note the wording: could. That's her assessment of a risk, and the data so far doesn't show the effect.
O Pulso
- Factories have slipped below the 50-point growth line for a second straight month, with the October PMI falling to 49.1 from 49.6.
- New orders, export demand and purchasing have all weakened, and buying activity dropped at its sharpest pace in eleven months.
- Heat linked to El Niño, which may last into 2027, is adding strain, alongside a sobering projection of 6,500 heat-related deaths.
- Business confidence has hit a two-year high, but the Bangko Sentral's 50-basis-point hike to 5.50 percent threatens to slow demand and investment.
- The next monthly readings will reveal whether manufacturers' optimism turns into orders and jobs, or whether rates and weather keep the sector contracting.
On a Tuesday in early November, the latest survey of Philippine factories settled at 49.1, a quiet reading that nonetheless marks a second straight month of contraction. Across the archipelago, manufacturers are holding back, their orders softening under a combination of cooling demand, scorching El Niño weather and a central bank that has just made borrowing more expensive. Yet beneath the numbers lies a mood of cautious hope, as firms have grown more confident about the year ahead even while their purchases and payrolls have yet to follow. Whether that optimism becomes real production or remains only a forecast is the question the coming months will answer.
The latest survey of Philippine manufacturing came out on Tuesday with a reading of 49.1 for October, down from 49.6 in September and beneath the 50.0 line that separates growth from decline. It is the second consecutive month that factories have shrunk, and the third time this year the sector has dipped under that mark. The index blends new orders, output, employment, supplier delivery times and stockpiles, and this month the weakness ran through much of it.
Firms cited soft demand and the punishing heat of El Niño, a phenomenon the state weather bureau says could persist until March or even June 2027. The US-based Climate Impact Lab has warned of 6,500 heat-related deaths in the Philippines through February 2027. Export orders also contracted, purchasing fell at its steepest rate in eleven months, and employment kept declining.
S&P Global's Siân Jones read the figures as a portrait of caution. Output and orders fell only modestly, but the sharper drop in buying and continued job losses suggest manufacturers are waiting out a subdued period. Stocks of finished goods edged up for the first time in four months, a sign that firms expect production to pick up.
That expectation lifted business confidence to a two-year high. Yet Jones noted that optimism has not yet become new orders or hiring. The Bangko Sentral ng Pilipinas has also just raised its policy rate by 50 basis points to 5.50 percent, a move that could further restrain demand and investment. The coming readings will show whether the hope in factory boardrooms reaches the production lines, or whether rates and heat keep the sector below the line.
The number came out on Tuesday: 49.1. That is the October reading of the S&P Global Philippines Manufacturing PMI, down from 49.6 in September and under the 50.0 line that divides growth from contraction. It is the second month in a row that Philippine factories have shrunk, and the third time this year the sector has slipped below that mark.
The survey draws on responses from around 400 manufacturers, stratified by detailed sector and by the size of their workforce. The headline figure is a weighted average of five indices: new orders at 30 percent, output at 25 percent, employment at 20 percent, suppliers' delivery times at 15 percent, and stocks of purchases at 10 percent.
Output fell more slowly than new orders in October. Firms pointed to weak demand and to hot weather linked to El Niño. The state weather bureau has said the phenomenon could last until March, or even June 2027. Separately, the US-based Climate Impact Lab has warned of 6,500 heat-related deaths in the Philippines through February 2027 amid the El Niño.
The softness was not only a domestic story. New export orders also contracted, though modestly. Purchasing activity fell by its largest margin in 11 months, and average lead times shortened slightly, a change the survey tied to scarcity of materials. Employment continued to decline.
S&P Global Market Intelligence principal economist Siân Jones read those details as a sign of caution. Declines in output and new orders remained modest, she said in a commentary, but the sharper fall in purchasing and further job losses suggest manufacturers are wary in a period of subdued demand.
Inventories told a mixed story. Pre-production stocks were steady, while stocks of finished goods grew marginally, the first increase in four months, as firms expected production to pick up in the coming months.
That expectation shows up in sentiment. Business confidence rose to a new two-year high, with firms anticipating that new projects and customers will support production growth over the coming year. Jones called this some encouragement, but added that the stronger optimism has yet to turn into a recovery in orders or hiring.
She also flagged a headwind from policy. The Bangko Sentral ng Pilipinas has just raised its policy rate by 50 basis points to 5.50 percent, and Jones said the higher borrowing costs could further restrain demand and investment. The next readings will show whether the confidence manufacturers report begins to appear in orders and payrolls, or whether the rate increase and the heat keep them below 50.
Citações Notáveis
Declines in output and new orders remained modest, but the sharper fall in purchasing and further job losses suggest manufacturers remain cautious amid subdued demand.— Siân Jones, principal economist, S&P Global Market Intelligence
The BSP's latest 50-basis-point rate increase could further restrain demand and investment through higher borrowing costs.— Siân Jones, S&P Global Market Intelligence
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