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Vietnam’s manufacturing sector returns to growth

By Dat Thanh

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HCMC – The Vietnamese manufacturing sector returned to growth in August, with the first rise in new orders since February, according to the S&P Global Vietnam Manufacturing Purchasing Managers’ Index (PMI).

The PMI rose to 50.5 in August, up from 48.7 in July, marking the first time it had crossed the 50.0 no-change mark in six months. This improvement indicates improving business conditions in the sector.

Manufacturers in Vietnam reported a modest increase in new orders, ending a six-month decline. Additionally, they saw a rise in new export business after five months of decline, though growth rates remained subdued due to ongoing demand fragility.

Similarly, manufacturing production recovered, ending a five-month period of falling output. The most significant recovery was observed in the investment goods category, where firms expanded their purchasing activity in response to higher new orders and greater output requirements.

However, employment in the sector continued to fall for the sixth consecutive month, albeit at a slower pace, attributed to signs of spare capacity. Firms also recorded a build-up of stocks of finished goods for the second month running, indicating unsold products due to weak demand.

Input costs increased for the first time in four months, driven by rising oil and food prices. Consequently, firms raised their selling prices, the first increase since March.

While suppliers’ delivery times shortened for the eighth successive month, indicating sufficient stock levels to meet demand for inputs, the improvement was the least marked since May.

Business confidence strengthened in the third quarter, with optimism in the 12-month production outlook reaching its highest level in five months. However, concerns remained about the overall strength of demand.

Andrew Harker, economics director at S&P Global Market Intelligence, said that although data showed encouraging signs of recovery in the Vietnamese manufacturing sector, demand conditions remained fragile. Moreover, higher input costs and selling charges were linked to rising oil prices.

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.

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