Vietnam's factory activity expansion slows in January
Despite, its 52.5 PMI reading showed solid improvement in business conditions.
Vietnam's manufacturing sector sustained its growth streak despite expanding at a slightly slower pace in January, supported by output and employment rising at their fastest paces in months.
The Purchasing Managers' Index from S&P Global registered 52.5, down slightly from December's 53.0 but still indicating solid improvement in business conditions.
The country's factories extended their growth streak to seven consecutive months in January, with production accelerating sharply in response to rising new orders and improving customer demand.
New orders expanded at a faster pace than in December, supported by a renewed upturn in export demand. Manufacturers reported receiving orders from other Asian economies, including India, marking the third monthly rise in export sales in the past four months, though the increase remained modest.
The surge in production prompted firms to step up hiring for the fourth consecutive month. Employment rose at the fastest rate since June 2024, albeit from a modest base, with some companies bringing on workers on a temporary basis only. Purchasing activity also extended its seven-month growth streak as firms responded to greater output requirements.
Despite the strong performance, manufacturers managed to reduce their backlogs of unfinished work for a second straight month, as products were shipped promptly to customers. Stocks of both raw materials and finished goods fell, with the latter declining at the fastest pace in four months.
However, supply chain strains persisted. Delivery times from suppliers continued to lengthen, though at the slowest rate in eight months, with manufacturers citing higher demand for inputs and material scarcity.
These shortages drove input costs sharply higher, with inflation only slightly softer than December's three-and-a-half-year peak. Firms responded by raising their selling prices rapidly, with the rate of increase quickening to the steepest since April 2022.
Business confidence continued to strengthen, improving for the fourth consecutive month to reach a 22-month high.
More than half of respondents predicted rising output over the coming year, expecting continued new order growth amid improving market conditions.
Andrew Harker, economics director at S&P Global Market Intelligence, said it was a solid start to the year for Vietnamese manufacturing. "The one potential headwind for firms, however, is the strength of inflationary pressures," he cautioned.
"So far demand has remained resilient in the face of these pressures, but we will need to keep an eye out for any softening of new order growth in the months ahead."
The survey polled around 400 purchasing managers across Vietnam's manufacturing sector.
