The country’s manufacturing industry contracted in March after growing in the past 18 months as factories served fewer clients and prices of raw materials increased.

On Wednesday, S&P Global reported that factory output declined to 49.4 from an expansion of 51 points in February based on its Purchasing Managers’ Index (PMI).

The index contains insights on the recent industry landscape from purchasing managers of 400 local manufacturers.

“Panelists noted that growing competition and fewer clients led to a reduction in new orders, with output scaled back as a result,” S&P Global Market Intelligence economist Maryam Baluch said.

Not since August 2023

The March level of 49.4 was the second time the manufacturing sector saw a contraction from 49.7 in August 2023.

“The growth in new export orders seen previously dissipated, with March data signaling a marginal drop in new business from overseas,” Baluch said.

S&P Global reported factories produced fewer goods after an expanding mode in the past 11 months.

These figures came after the global economic researcher said the US and Chinese economies would grow moderately due to tariff threats from US President Donald Trump.

“Risks include the full implementation of the proposed US agenda on taxes, trade, and immigration; the end of resilient consumer spending and labor demand,” S&P Global said.

According to the Philippine Statistics Authority, the country’s top export market in February was the United States, followed by Hong Kong and China, which increased the total local export sales by 3.9 percent over one year.

However, a survey of economists by major news firm CNBC reveals American consumers must have slowed spending in the first quarter as respondents project inflation to be sticky at around 2.9 percent, below the US government’s target of 2 percent.

Meanwhile, S&P Global projects China’s economy will likely grow slower below the government target of 5 percent.

The research institution added prices of inputs for Philippine manufacturers rose moderately in March, leading to higher consumer prices.

“However, both cost burdens and output charges rose at rates weaker than their respective historical averages,” the research institution said.

Given the reduced orders, S&P Global said manufacturers paused hiring new workers after a moderate increase in February. “

Levels of unfinished work also fell, after being accumulated at the strongest pace in nearly two years in the prior survey period,” the economic researcher said.

Despite the contraction, S&P Global said manufacturers are upbeat that orders will increase in the next 12 months.

“Optimism was reflected in firms’ decisions to maintain their purchasing activity and build stocks. At the same time, inflationary pressures remained relatively contained and subdued in the context of the series history,” Baluch said.