Factory activity growth slows in Aug.

Philippine manufacturing activity expanded in August but at its slowest pace in two months amid a muted rise in output and new orders as the higher US tariffs took effect, S&P Global said on Monday.

The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) stood at 50.8 in August, easing from 50.9 in July.

This was the lowest PMI reading since the 50.7 reading in June.

A PMI reading above 50 denotes better operating conditions than in the preceding month, while a reading below 50 shows a deterioration.

“The Philippines manufacturing sector once again indicated a subdued performance, with growth rates for output and new orders remaining below their historical averages,” Maryam Baluch, economist at S&P Global Market Intelligence, said.

Available S&P Global data on select Association of Southeast Asian Nations members showed the Philippines had the third-highest PMI reading, behind Thailand (52.7) and Indonesia (51.5).

In the report, S&P Global noted “modest” growth in both output and new orders in August, supported by new customer acquisitions and improved demand.

Manufacturing output went up for a third straight month in August, “with the pace of increase reaching its fastest rate in four months,” it said.

“Supporting the upturn in output was a sustained rise in new business. The growth rate was broadly in line with that observed in July, with anecdotal evidence pointing to new customer acquisitions and improved underlying demand trends as driving the latest expansion,” S&P Global said.

Philippine manufacturers also noted a stronger foreign demand for goods, with the growth in orders accelerating to a seven-month high.

S&P Global said purchasing activity expanded, with August data showing the fastest rise in four months.

Ms. Baluch noted job creation was halted in August, ending two straight months of “marginal increases” in employment.

“The combination of rising production requirements and stagnant employment resulted in a further buildup of backlogs of work, with the rate of accumulation the fastest in six months,” it said.

S&P Global said manufacturing firms reported a “modest decline” in stocks of finished goods in August, as it fulfilled new orders.

“Reductions have now been noted in three of the last four survey periods, with some firms reporting that they released stock onto the market to mitigate potential damage at warehouses from heavy rainfall,” it said.

S&P Global said inflationary pressures were relatively subdued in August even as material prices rose.

“Subdued cost pressures, coupled with manufacturers’ efforts to control their pricing in a bid to remain competitive, could provide the boost firms need to regain sales momentum,” Ms. Baluch said.

Philippine manufacturers’ confidence for the next 12 months improved for a fourth straight month to its highest since November 2024.

“Firms were hopeful that demand conditions will improve and support production. However, positive sentiment remained subdued compared to the long-term series average,” S&P Global said.

Factory activity may have been affected by the implementation of the 19% tariff on many goods from the Philippines starting Aug. 7.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the slowdown was due to the US tariffs that led to a “wait-and-see attitude” for some exporters.

“(This was) partially offset by some frontloading of exports before Trump’s higher tariffs took effect on Aug. 7, 2025, as well as some seasonal increase in importation and production activities by some local manufacturers during the third quarter,” he said.

Mr. Ricafort noted the higher US tariffs could eventually slow demand for exports to the US, as well as dampen economic growth. — Aubrey Rose A. Inosante