Vietnam PMI remains in contraction in February
Weak demand causes decline in new orders and production
Vietnam's manufacturing activity remained in contraction in February with the S&P Global Vietnam Manufacturing Purchasing Managers' Index (PMI), staying below the 50.0 neutral markfor the third month in a row,
Although the PMI slightly improved to 49.2 in February from 48.9 in January, this figure indicates a marginal decline in business conditions throughout the month.
The Vietnamese manufacturing sector faced challenges in February, reflecting weak demand that led to a decline in new orders and production.
The difficulties prompted companies to reduce their workforce once again. On the cost front, inflation for input costs slowed, with some firms lowering their prices for the second consecutive month.
New orders, which had seen their first decline in four months during January, decreased again in February, marking the fastest contraction since September. Respondents reported weakened demand both at home and abroad, with exports particularly suffering from a notable drop in new international business for the fourth month in a row.
Manufacturing production fell for the second straight month in February, as firms faced shortages of new orders, leading them to hesitate in replacing departing staff. Employment numbers decreased for the fifth consecutive month, although the pace of job cuts was slower than in January. Despite these layoffs, there were signs of excess capacity in the sector due to diminishing new orders, and outstanding business decreased significantly, marking the largest drop in 16 months.
Interestingly, purchasing activity saw a slight uptick in February, driven by some firms’ confidence in future manufacturing output. Business sentiment improved for the second month, reaching the highest level since June of the previous year, with hopes for stable economic conditions that would facilitate improved new orders and production growth.
However, firms faced issues regarding transportation, including lengthened supplier delivery times and increased freight costs, which contributed to a rise in input costs for February. Despite this, manufacturers reduced their selling prices in response to weak demand, albeit at a slightly faster rate than previously.
Andrew Harker, Economics Director at S&P Global Market Intelligence, noted that although manufacturers are encountering uncertain demand, they remain hopeful for future improvement, provided that transportation issues and supply constraints are eased in the coming months.
