Manufacturing dips after minor gains

The S&P Global Vietnam Manufacturing Purchasing Managers’ Index (PMI) dropped to 47.7 in March, down from 51.2 in February and below the 50.0 no-change mark for the fourth time in the past five months.

“Renewed falls were seen in output, new orders and employment amid reports of muted customer demand,” according to an S&P report, which added that the index pointed to a significant deterioration in business conditions.

Businesses said that the pause in growth was generally reflective of relatively subdued global demand. Both total new business and new export orders fell accordingly.

The drop in overall new orders was the fourth in the past five months, while new business from abroad dipped for the first time in three months.

With output requirements softening, manufacturers responded by reducing their purchasing activity and employment, and the latter was also impacted by staff resignations.

The drop in purchasing activity fed through to lower stocks of inputs, with inventories down for the third month running. The rate of depletion was significant, and the sharpest since June 2021.

However, there were also signs of inflationary pressures easing at the end of the first quarter. Although increased supplier charges meant that input costs continued to rise, the rate of inflation was the lowest since last October, ending a spell of accelerating cost inflation.

With input prices rising at a slower pace and firms keen to price competitively in order to stimulate demand, output prices increased marginally in March. The pace of selling price inflation was the slowest in the current three-month sequence of rising charges.

Andrew Harker, Economics Director at S&P Global Market Intelligence, said: “The softening of conditions in March will hopefully be just a blip, however, with firms remaining confident in the year ahead outlook.”

A survey of 6,500 manufacturers by Vietnam’s national General Statistics Office in the first quarter showed that company leaders thought the quarter was more challenging than the fourth quarter last year.

About 52.4% of businesses said that domestic demand was low and had negatively affected their operations.

Other challenges cited were high competition and high loan interest rates.