HCMC – The S&P Global Vietnam Manufacturing Purchasing Managers’ Index (PMI) in September was 49.7, down from 50.5 in August.
A PMI score below 50 indicates a contraction in the manufacturing sector, signaling a slight deterioration in business conditions for Vietnamese manufacturers.
Despite the contraction, the sector saw a second consecutive monthly increase in new orders. The rate of expansion was consistent with the previous survey period. Export orders, particularly from other Asian economies, contributed significantly to the rise in new business.
However, the increase in new orders did not translate into higher output. Production levels decreased slightly, the sixth decline in seven months. Employment also decreased for the seventh consecutive month, with the rate of job cuts being the most significant since June.
Inflation picked up speed at the end of the third quarter, with both input costs and output prices rising. The rate of input cost inflation reached a seven-month high, driven by rising fuel prices and the cost of imported raw materials.
Despite these challenges, business confidence in the sector strengthened for the fourth consecutive month, reaching its highest level since February. About 45% of respondents expect output to increase in the coming year, while only 7% were downbeat about future growth.
Andrew Harker, economics director at S&P Global Market Intelligence, said that the sector is at a crossroads. While demand and business confidence are improving, excess capacity is leading to reduced output and employment. The sector’s performance in the coming months will depend on whether the recovery in new orders continues.
Data suggested that the Vietnamese manufacturing sector faces a delicate balance between rising demand and the need for cautious expansion. Future growth will hinge on the sector’s ability to capitalize on increasing new orders while managing costs and capacity.