Growth momentum in Vietnam’s manufacturing sector came to a standstill in March, following marginal improvements observed in the preceding two months.
According to the S&P Global Vietnam Manufacturing Purchasing Managers’ Index (PMI), business conditions remained largely static, with both output and new orders experiencing slight decreases.
The PMI dipped below the 50.0 no-change mark to 49.9 in March, signaling a halt in the earlier trend of improving business conditions seen since the beginning of 2024. Despite this, overall operating conditions remained steady.
March saw signs of weakening demand, leading to a decline in new orders despite efforts to stimulate sales through discounts. Moreover, new export orders recorded a significant drop, the most pronounced since July 2023, attributed to competitive pressures and geopolitical issues.
“Growth stalled in the Vietnamese manufacturing sector in March as subdued demand put the brakes on new orders and production,” said Andrew Harker, economics director at S&P Global Market Intelligence.
Towards the end of the quarter, firms scaled back production, particularly in intermediate goods sectors, although expansion was reported by consumer and investment goods producers. However, there was a positive outlook for the future, with confidence reaching an 18-month high. Manufacturers expect an increase in production, driven by the launch of new products and anticipated improvements in market demand.
Despite the drop in new orders, firms continued to work through outstanding business for the second consecutive month, with the rate of depletion being the fastest in five months. Reduced purchasing activity over the past five months led to significant decreases in stocks of inputs and finished goods, with the latter experiencing the greatest decrease in 33 months.
The pace of input cost inflation slowed down in March, attributed to reduced demand for inputs and linked to higher raw material and oil prices. Selling prices also experienced a marginal decline due to competitive pressures and subdued demand.
There is a growing sense of optimism among firms, with many believing that the sector would be able to gather steam in the coming months. This positive outlook has fueled a surge in job creation at the end of the first quarter, Andrew Harker added.
