The country's manufacturing sector grew slower in February as factories' new orders continued to increase moderately for the seventh month, a report by S&P Global said Monday.

Philippine manufacturing showed an expansionary mode at 51 last month, although slower than the 52.3 in January, based on the S&P Global Philippines Purchasing Managers' Index. The February level also came close to contraction mode, which is 49 and below.

"Robust growth observed from the end of the previous year into the beginning of this year waned in February, as the latest survey data indicated slower expansions in output and new orders," S&P Global Market Intelligence economist Maryam Baluch said.

Still, Baluch said companies hired additional workers as they saw a labor backlog for the first time after four months. As a result, factory employment peaked in nearly two years.

Inventories remained sufficient, which S&P said reflected "cooling" demand trends and moderating production requirements.

Overall operating costs were relatively low, which helped goods appear more attractive to customers.

"Although material shortages and transportation costs continued to drive up input prices, the rate of increase was the slowest in the current nine-month sequence of inflation," S&P said.

The S&P survey among purchasing managers from 400 firms said they saw "moderate" growth in February inflation. This came ahead of the inflation report on goods and services to be released by the Philippine Statistics Authority on 5 March.

Overall inflation remained sticky at 2.9 percent in January 2025 and December 2024, reflecting elevated prices of food and non-alcoholic drinks, utilities, and housing.

Moving forward, S&P projects increased factory orders as political candidates spend more on campaign activities for the national and local elections on 12 May.

"Firms expressed hope that demand trends would continue to improve, and that the upcoming election would provide an additional boost," the economic and business researcher said.

Based on remarks from the Bangko Sentral ng Pilipinas Monetary Board, Baluch added that inflation will likely remain manageable, which will encourage lower borrowing costs and ultimately, higher consumption by households and firms.

"Meanwhile, inflationary pressures eased, thus suggesting that the central bank will continue to proceed with a loosening of its monetary policy. This could in turn boost somewhat weakened business confidence and support further new order growth," Baluch said.

BSP Governor and Monetary Board Chairman Eli Remolona Jr. said the economy could expand by 6 percent this year from 5.6 percent last year if global trade remains normal.

Economists warn global inflation might spike if Mexico, China, and Canada deploy drastic retaliatory measures against high tariffs on US imports under the Trump administration.