By Aubrey Rose A. Inosante, Reporter

PHILIPPINE MANUFACTURING activity rebounded in October, despite a further drop in new orders and output, according to S&P Global.

The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) improved to 50.1 in October, a turnaround from 49.9 in September.

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

S&P Global noted that the latest PMI reading indicates “broadly stable” operating conditions.

Maryam Baluch, economist at S&P Global Market Intelligence, said the Philippine PMI reading in October reveals a “mixed picture.”

“The two largest segments, new orders and output, indicated further declines. Additionally, fresh contractions were observed in new export orders and purchasing activity, highlighting underlying demand conditions,” she said.

S&P Global noted that output and new orders “have now failed to record any growth for a second consecutive month, a trend not seen in over four years.”

“The decline in output was closely associated with falling new orders, which panelists linked to adverse weather conditions and the end-of-life status for certain products,” it said, adding that the pace of contraction slowed month on month.

S&P Global said new factory orders “fell at a stronger rate” in October, amid a “sluggish demand climate, with clients often putting orders on hold.”

“In addition, new export orders fell for the first time since May and at a solid pace which was the most pronounced for a year. Companies reported weaker demand from international clients,” it added.

S&P Global said the sharp drop in new orders led manufacturing firms to scale back their purchasing activity. This was the first decline in purchasing activity in nearly two years.

“However, according to anecdotal evidence, last-minute cancellations of orders meant that both pre- and post-production inventories recorded marginal increases. The latter registered a fresh uptick, marking the first expansion in three months,” it said.

Delivery times for inputs also lengthened in October, it said.

S&P Global said October marked a “further alleviation of underlying cost pressures.”

“The rate of input price inflation was modest and the weakest in three months. However, where goods producers reported higher prices, this was attributed to rising supplier and material costs,” it said.

Ms. Baluch said Filipino manufacturers also offered discounts in October to stimulate demand in a subdued market.

“Charges levied for Filipino manufactured goods fell for the first time in 19 months. The rate of decrease was marginal but the strongest since April 2020,” S&P Global said.

Business confidence also improved, nearing August levels, as manufacturers anticipated stronger output and strengthening demand trends” over the next 12 months.

“On a more positive note, manufacturers grew more optimistic about their growth prospects for output in the coming year. Companies also continued increasing their workforce numbers, with the latest rise in staffing numbers the strongest in three months,” Ms. Baluch said.

Ms. Baluch said the manufacturing sector remained in sluggish territory for most of the second half.

“Whether it can see a notable recovery in performance in the coming months will depend greatly on efforts to stimulate consumer demand,” she said.

S&P Global Marketing Intelligence Economics Associate Director Jingyu Pan said Philippine factory output in October showed that conditions are stabilizing.

“We have the output index falling at a less pronounced, in fact, very marginal pace. I think that’s a positive sign,” she said in an interview on Money Talks with Cathy Yang on One News on Monday.

However, Ms. Pan partly attributed the decline in output to a series of earthquakes in Cebu, a key electronics manufacturing hub, which damaged some business facilities.

Global trade tensions are expected to weigh on new export orders, with subdued demand already seen in October.

“I think, reflecting the kind of worries we had in terms of trade tensions coming through to actually impact the manufacturing economy in a more pronounced phase, especially now that as we enter the final quarter of the year with the tariffs settled in. I think that is something that we have to watch,” she said.

The US implemented the 19% tariff on Philippine-made goods on Aug. 7.

Better weather conditions may have also helped lift the Philippine manufacturing activity in October.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said factory activity shifted to expansion mode partly due to better weather conditions followed by two months of adverse weather and earthquake disruptions.

“(This is) also partly due to the positive effects of the local policy rate cuts that reduced borrowing costs for some local manufacturers,” he said in a Viber message.

In the coming months, Mr. Ricafort warned that political noise could dampen manufacturing activity, especially among firms linked to infrastructure supply chains.

THE PHILIPPINES’ INDUSTRY sector — including manufacturing and construction — may have slumped to its lowest level in recent years, dragging third-quarter economic growth, Economy Secretary Arsenio M. Balisacan said.

“I am not as optimistic (on growth) as I used to, given what the data that have been coming out in recent weeks, and particularly the performance of our industry,” he told reporters on the sidelines of an event on Monday.

“The industry is probably at its lowest point in recent years.”

He did not provide details on the gross domestic product (GDP)  data, which will be released by the Philippine Statistics Authority on Nov. 7.

Mr. Balisacan said the corruption scandal, weather-related disruptions and mounting global uncertainties may have weighed on GDP growth in the third quarter.

He said there was a slowdown in government spending and fixed-capital formation, as well as other areas like industry and services.

A crackdown on anomalous flood control projects alongside a corruption probe may have affected government disbursements.

The Marcos administration only disbursed P1.46 trillion in the third quarter, data from the Bureau of the Treasury showed, P141.73 billion less than its P1.6-trillion program for the period. This is mainly due to lower spending by the Department of Public Works and Highways, which is at the center of a corruption scandal involving flood control projects.

Mr. Balisacan also noted that adverse weather conditions that led to the suspension of work and classes may have contributed to slower growth in the July-to-September period.

However, he expects the impact on growth to be temporary, with a recovery likely in the next few quarters.

In the first six months of 2025, the economy grew by an average of 5.4%. The government is targeting 5.5-6.5% GDP growth this year.

“Our economic fundamentals have remained strong. The potentials have remained strong, our GDP growth potential is quite high, 6% and above. But reaching those potentials is another matter, and those are affected by instability, uncertainty, and we’ll see,” he said.

The country’s GDP likely grew by 5.3% in the third quarter, based on a median forecast of 18 economists and analysts polled by BusinessWorld. This is slower than the 5.5% expansion in the second quarter, but a tad faster than the 5.2% expansion in the July-to-September period of 2024.

RICE TARIFF REVIEW
Meanwhile, Mr. Balisacan said the Economic Development Council is scheduled to convene on Tuesday to tackle the proposal to raise rice tariffs to 35% from the current 15%.

The Department of Trade and Industry will present its recommendation on rice tariff adjustments during the meeting. This recommendation was endorsed to the Council by the Tariff-Related Matters Committee.

The Department Agriculture earlier recommended raising the rice import tariff to its original 35% rate from the current 15%.

Philippine President Ferdinand R. Marcos, Jr. on Sunday approved the extension of the country’s rice import ban until yearend.

Sought for comment, Mr. Balisacan said the government has “good enough supply” of rice to temper increases in retail prices.

“The overall goal of that is to protect farmgate prices from further falling, because in the past almost a year now, farmgate prices have dropped by more than 30%,” he said.

Farmer groups have blamed the current 15% tariff for keeping farmgate prices low by encouraging cheaper imports, undermining local producers.

However, Mr. Balisacan warned that tweaking the rice import tariff alone won’t fix the farmers’ problems.

“You have to use a combination of policy tools to address those problems, and that’s what we are going to present tomorrow,” he said noting that this approach will ensure the market will support medium-term and long-term development efforts.

Samahang Industriya ng Agrikultura spokesman Jayson H. Cainglet argued that the rice tariff cut to 15% has failed to benefit consumers, with importers and traders instead pocketing the savings.

He noted that palay production cost is P14.61 per kilo, but palay is only being bought at P8-12 per kilo, he told BusinessWorld in a Viber message on Monday.

He also noted that the reduced tariff has resulted in P25-billion foregone revenues from the imported rice as of end-August.

Separately, Mr. Balisacan led the opening of the Presidential Filipinnovation Awards that will select five winners out of 15 finalists which receive a cash grant and post-competition support package worth up to P3.5 million, including coaching and mentoring.

“Our goal here is that we can mainstream innovation in the private sector, that we can increase the success rate of our innovators,” he said during a briefing in Crowne Plaza Manila Galleria.

Economy Undersecretary Rosemarie G. Edillon said the government is targeting to raise the Philippines’ rank in the Global Innovation Index (GII) by 2028. The Philippines is currently at 50^th place out of 139 economies in the 2025 GII. — Aubrey Rose A. Inosante