Philippine Manufacturing Stirs to Life in April, But Can It Last?

The Philippine manufacturing sector rebounded sharply in April 2025, with the S&P Global Purchasing Managers’ Index (PMI) surging to 53.0—its highest reading since August 2023—after contracting to a 19-month low of 49.4 in March. The recovery, driven by a surge in domestic demand and pre-election optimism, raises hopes for a sustained turnaround. However, underlying challenges such as stagnant export orders and cautious business confidence suggest the rebound may be short-lived. Here’s what investors need to know.

The Drivers of the Rebound

The April PMI’s expansion was powered by sharply rising new orders and output growth, both at their fastest rates since late 2023. Domestic factors were key: manufacturers reported new client wins and a pre-election spending boost, with businesses anticipating heightened activity ahead of the May 2025 presidential election. Production levels surged to end a period of slowing growth, while purchasing activity accelerated for the 17th consecutive month.

Notably, the improvement was domestically driven. Foreign demand for Philippine goods remained “broadly stagnant,” as global competition and trade policy uncertainties—such as U.S. tariff disputes—continued to weigh on exports. This divergence underscores a critical imbalance: the sector is relying on temporary domestic tailwinds to offset weak international demand.

The Clouds on the Horizon

Despite the PMI’s strong reading, three red flags loom over the sector’s sustainability:

1. Stagnant Employment: Hiring froze for the second straight month, as firms remained cautious about post-election demand. With output rising but no workforce expansion, the sector risks overextension if the recovery persists.

2. Low Business Confidence: Confidence among manufacturers hit its second-lowest level on record, with firms skeptical that the election-driven boom would outlast the political cycle. Concerns about tariffs and global trade tensions also dampened optimism.

3. Inventory Buildup Risks: Raw material and post-production inventories rose to multi-year highs, as firms preemptively stockpiled to avoid supply chain disruptions. While this reflects proactive planning, overstocking could backfire if domestic demand weakens post-election.

Input Costs and Pricing Power

Input costs increased modestly in April, but inflationary pressures remain subdued compared to historical norms. Firms passed on only marginal price hikes to customers, suggesting limited pricing power. This stability could be a double-edged sword: while it keeps margins intact, it also reflects weak demand for cost increases.

The Election Wildcard

The May presidential election looms large. While pre-election activity fueled April’s rebound, businesses fear a post-election slowdown. Historical data shows that Philippine manufacturing often sees volatility after major elections, as policy uncertainty and shifting priorities disrupt investment.

Investment Takeaways

• Short-Term Optimism: The April PMI’s strength suggests near-term opportunities in domestic-facing sectors like construction and consumer goods, which benefit from election-related spending.
• Long-Term Caution: Investors should prioritize firms with export diversification or resilience to global trade headwinds. Sectors reliant solely on domestic demand—such as real estate or infrastructure—face risks if post-election sentiment sours.
• Monitor Policy Signals: A new administration’s stance on tariffs, foreign investment, and infrastructure spending could redefine the sector’s trajectory.

Conclusion

The Philippine manufacturing sector’s April revival is a welcome relief after March’s contraction, but its foundation is shaky. Domestic demand and pre-election euphoria propelled the rebound, yet external risks and weak confidence threaten to stifle sustained growth. Investors should remain vigilant: while the PMI’s 53.0 reading signals a strong start to the second quarter, the path to durable expansion hinges on resolving export stagnation, stabilizing employment, and navigating post-election uncertainty. For now, the sector is a flicker of hope—but whether it becomes a flame depends on more than just April’s numbers.

Final PMI figures: April 2025 PMI = 53.0 (vs. 49.4 in March). New orders grew at the fastest pace since November 2023, while export orders remained flat for the second consecutive month.