HCMC – Vietnam experienced a fifth successive monthly fall in manufacturing last month but the decline was the softest in five months.
The S&P Global Vietnam Manufacturing Purchasing Managers’ Index (PMI) was 48.7 in July, up from 46.2 in June. The latest reading, below the 50.0 no-change mark, indicated to a sustained deterioration in the health of the manufacturing sector but this was the mildest monthly drop this year.
Output, new orders and employment contracted mildly in July, with new orders only slightly decreasing, indicating some signs of demand stabilizing.
However, manufacturers reported that overall demand remained subdued, particularly in export markets. New export orders fell more rapidly than total new business, with some firms attributing it to reduced orders from European customers.
Firms reduced production in response to the fall in new orders, but the rate of contraction softened compared to the previous survey period, partly due to a reduction in power outages. Backlogs of work continued to decrease and the weakness in demand contributed to an unwanted build-up of inventory holdings.
Employment was scaled back for the fifth consecutive month, but at a moderate pace. Suppliers’ delivery times were further shortened, largely influenced by reduced shipping disruptions and a lack of demand for inputs.
Meanwhile, input costs decreased for the third consecutive month, as suppliers offered discounts to cope with the low demand. In response, Vietnamese manufacturers lowered their own selling prices to stimulate demand.
Despite some improvements in July, business confidence remained relatively muted, with firms hoping for a recovery in customer demand to drive the growth in production. However, they remained concerned about the challenges of securing new business.
Andrew Harker, economics director at S&P Global Market Intelligence, said that despite the ongoing pressure in July, there were indications that demand might be stabilizing, as new orders edged down at the slowest pace in five months. Firms are hopeful that this trend will lead to renewed growth in orders in the coming months.
The S&P Global Vietnam Manufacturing PMI is compiled based on responses from some 400 manufacturers. The index varies between 0 and 100, with a reading above 50 indicating an overall increase and below 50 signifying a decrease in the sector’s performance, compared to the previous month.
