A S&P Global Philippines Manufacturing PMI survey showed Philippine factory activity returned to expansion in December 2025 to signal a modest improvement in the sector’s health after suffering its sharpest contraction in four year.

PMI stood at 50.2 in December, above the 50.0 threshold that separates expansion and contraction, reflecting an improvement from the 47.4 recorded in November, which posted the steepest drop since August 2021.

“December PMI data signalled a slight improvement in operating conditions in the Filipino manufacturing sector, an encouraging move from the solid deterioration seen in the month prior,” S&P Global Market Intelligence Maryam Baluch said.

New order volumes grew for the first time since August to end a three-month period of contraction, with growth the most pronounced since April.

“New order volumes rose for the first time in four months, which helped partly ease the ongoing downturn in production. Fuelled by this positive direction, companies increased their purchasing activity for the first time since September, while the labour market showed signs of stabilising,” Baluch said.

Purchasing activity for December rose for the first time in three months, marking the fastest pace since August, allowing companies to better manage inventory levels. Holdings of pre-production items were unchanged month-on-month, while stocks of finished goods saw an increase.

Firms also reported growth in post-production inventories in anticipation of future demand, as they expect an increase in output through 2026. Optimism, however, declined from the 12-month high in November.

“That said, the improvement was tepid across the sector, and its sustainability will largely depend on whether demand can be maintained and further bolstered bringing growth back to production,” Baluch said.

“Additionally, the sector faces notable headwinds from sharply declining export market conditions, which are limiting the potential for broader expansion. Consequently, at present, the manufacturing sector’s growth is primarily being driven by domestic demand, with external markets offering little support,” she added.

Survey responses were collected in the second half of December, taking into account responses from purchasing managers in a panel of around 400 manufacturers. The PMI is a weighted average of new orders, output, employment, suppliers’ delivery times, and stocks of purchases.

The Philippine Statistics Authority (PSA) is scheduled to release official government figures on manufacturing for the month of December on February 6, 2026.