Vietnam’s manufacturing slips as prices soar to 15-year high
The Strait of Hormuz disruption sends freight, fuel and raw material costs spiralling to levels not seen since 2011.
The war in the Middle East delivered its most visible blow yet to Southeast Asia's export powerhouse in March, driving factory gate prices in Vietnam to their highest in almost 15 years and forcing manufacturers to slash purchasing, cut jobs, and confront the worst supplier delays in four years.
The S&P Global Vietnam Manufacturing PMI fell to 51.2 in March from 54.3 in February, pointing to the least marked improvement in operating conditions since last September — though the index held above the 50.0 threshold for a ninth consecutive month.
The inflation shock dominated the survey. Nearly half of all respondents reported an increase in input costs during March, with the pace of inflation the sharpest since April 2022, as higher oil prices pushed up freight, fuel, and transportation costs. Manufacturers swiftly passed the burden downstream: output prices rose at one of the sharpest rates since the survey began in 2011, with the pace of selling price inflation the steepest in just under 15 years.
The price surge choked demand. New orders continued to grow, but only barely, and the true picture was murkier still. Some firms reported that clients had brought forward purchases to get ahead of further price rises, meaning the modest expansion in new orders flattered underlying demand. Export orders told a starker story, falling markedly after holding stable in February.
Output kept rising — extending an eleven-month run of growth — but the rate of expansion was the weakest since June 2025. With growth slowing and costs mounting, firms pulled back sharply across the board. Input buying fell markedly, ending an eight-month sequence of expansion, whilst staffing levels declined for the first time in six months as companies reported difficulties replacing departing workers and a drop in temporary staff.
Supply chains buckled under the strain. Supplier delivery times lengthened to the most pronounced extent in four years, with respondents citing higher fuel costs as the driver of transportation delays. Backlogs of work accumulated for the first time in four months, and manufacturers dipped into finished goods stocks to satisfy outstanding orders, resulting in a sharp drawdown in post-production inventories.
Business confidence fell to a six-month low, with firms expressing concern over the war's impact on international demand, prices, and material supply.
S&P Global Market Intelligence economics director Andrew Harker said the data laid bare Vietnam's acute exposure to the conflict. "Given the country's reliance on oil imported from the affected region, the impact on prices and supply chains would have been expected to some extent. The rate at which input cost inflation accelerated, though, and the subsequent increase in selling prices — which was the fastest in almost 15 years — shows the immediate and marked effects that firms are experiencing," he said.
Harker offered little comfort on the near-term outlook. "The near-term outlook therefore appears bleak, unless a speedy resolution to the war and the disruption through the Strait of Hormuz can be achieved," he warned.
Manufacturers on balance still expect output to rise over the coming year, anchored by hopes that underlying demand will hold firm. But with the Strait of Hormuz showing no sign of reopening and oil prices remaining elevated, that optimism rests on an increasingly fragile foundation.
