HCMC – Vietnam’s manufacturing sector saw a continued decline in new export orders in May as U.S. tariffs weighed heavily on demand, though overall business conditions showed signs of stabilizing, according to the latest S&P Global Vietnam Manufacturing Purchasing Managers’ Index (PMI).
The PMI rose to 49.8 in May from 45.6 in April, still below the 50.0 no-change threshold for the second consecutive month. The slight improvement signals a near-stabilization in business conditions, following a sharper contraction in the previous month.
New export orders fell sharply again in May, mirroring the pace of decline seen in April. Survey respondents attributed the drop to subdued market demand and the continued impact of the tariffs. Total new orders also declined but at a softer rate than in April.
Despite weak demand, manufacturing output rebounded in May after contracting in the month earlier. Some firms cited greater stability in U.S. tariff policy as a factor supporting production growth. Capacity improvements were also reported.
Commenting on the survey results, Andrew Harker, economics director at S&P Global Market Intelligence, said, “The news around tariffs continues to play a key role in shaping trends in Vietnam’s manufacturing sector. While more stable U.S. tariff policies supported a rebound in output and boosted confidence, the persistent weakness in new export orders remains a concern. The first decline in input costs in nearly two years is also a notable development”.
Employment in the sector continued to decline, albeit marginally, driven by reduced workloads and staff resignations. The drop in employment was the slowest since October last year.
Meanwhile, purchasing activity saw a modest increase, ending a two-month period of contraction. However, stocks of both inputs and finished goods declined as firms hesitated to build inventories and prioritized the prompt shipment of products to customers.
The survey also pointed to a slight lengthening in suppliers’ delivery time, with slow traffic noted as a contributing factor.
In a subdued demand environment, suppliers offered discounts, leading to a reduction in input costs for the first time in 22 months. As a result, manufacturers continued to lower their selling prices, marking the fifth consecutive month of output price declines.
Business confidence improved in May as tariff policies appeared more stable, though sentiment remained below the long-term average, with many firms cautious about potential future tariff impacts.
“As we approach the mid-point of the year, eyes will remain on U.S. tariff policy to see how the Vietnamese manufacturing sector will be affected,” added Harker.
The S&P Global Vietnam Manufacturing PMI is a monthly index that measures the performance of the Vietnamese manufacturing sector. It is compiled from responses to questionnaires sent to purchasing managers at some 400 Vietnamese manufacturing companies.
The index ranges from 0 to 100, with a reading above 50 indicating an expansion in the sector compared to the previous month, and a reading below 50 showing a contraction.
