HCMC – Vietnam’s manufacturing sector displayed signs of improvement in January 2024, ending a five-month falling streak, as the S&P Global Manufacturing Purchasing Managers’ Index (PMI) rose to 50.3 from December’s 48.9.
The resurgence was primarily driven by expansions in new orders and production, propelled by a modest rise in total new business. Both domestic and export markets exhibited signs of recovery, prompting firms to increase production volumes, with intermediate goods producers experiencing the most significant upturn.
“It was an encouraging start to 2024 for the Vietnamese manufacturing sector, with some welcome improvements in new orders and production,” said Andrew Harker, economics director at S&P Global Market Intelligence.
Despite this positive momentum, staffing levels and purchasing activity remained stable. Backlogs of work continued to accumulate for the second consecutive month, with the rate of accumulation being the most pronounced since March 2022.
Challenges in the global supply chain affected inventory levels, leading to decreased post-production and pre-production inventories. Shipping delays and transportation issues contributed to an increase in suppliers’ delivery times, marking the first deterioration in vendor performance in over a year.
Higher shipping costs and transportation challenges also led to a notable increase in input prices for Vietnamese manufacturers. In an effort to stimulate demand, firms reduced their selling prices, ending a five-month sequence of inflation.
Although overall confidence persisted, the outlook for the year ahead dropped to a seven-month low. Economic conditions emerged as a concern for some manufacturers, indicating a cautious approach amid ongoing global challenges.
There were various reports of issues with transportation and shipping in January, resulting in delivery delays and higher costs. Firms lowered their own selling prices, however, which suggests that demand conditions remain relatively muted, Harker said.
The S&P Global Vietnam Manufacturing PMI is compiled based on responses from around 400 manufacturers and is a key indicator of the sector’s performance, with a reading above 50 indicating growth and below 50 signifying a decrease compared to the previous month.
