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Thursday, April 25, 2024

Vietnam manufacturing still contracts in December 2023

By Dat Thanh

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HCMC – Vietnam’s manufacturing industry continued to contract in December last year, with the S&P Global Vietnam Manufacturing Purchasing Managers’ Index (PMI) staying at 48.9.

Although this figure showed a slight improvement from November’s 47.3, it remained below the 50.0 no-change mark. This is the fourth consecutive monthly decline.

Throughout last year, the manufacturing sector’s health deteriorated, with improvements seen only in February and August. The average PMI reading for the year was at its lowest since the Covid-19 outbreak in 2020.

The decline in conditions in December was attributed to subdued demand, which led to a decrease in new orders for the second consecutive month. Manufacturers refrained from raising the selling prices of their products, despite notable rises in input costs.

“The final month of the year was indicative of the picture for much of 2023 in the Vietnamese manufacturing sector, with subdued demand limiting production volumes. Firms responded to demand weakness by restricting price rises in December to try and help stimulate new business. This was despite a further marked increase in their own input costs,” said Andrew Harker, economics director at S&P Global Market Intelligence.

As new orders continued to decrease, production volumes were cut for the fourth consecutive month in December. However, manufacturers were optimistic about output expansion in 2024, driven by hopes of recovery in both domestic and export markets, along with business expansion plans.

Despite the drop in new orders, manufacturers maintained stability in employment and purchasing activity. Inventories of inputs decreased for the fourth month, while those of finished goods remained unchanged. Backlogs of work increased for the first time in a year.

“Attention now turns to the prospects for 2024, with firms still optimistic on balance that output will expand. This led to broad stability of employment and purchasing activity despite the reductions in new orders, as manufacturers attempt to maintain capacity in the hope of better days to come,” he added.

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.

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