Vietnam's factories expand at fastest pace in 19 months as confidence soars
A roaring domestic demand revival propelled Vietnamese manufacturing to its best performance since mid-2024.
Vietnam's manufacturing sector charged ahead in February at its fastest pace in 19 months, as surging domestic demand pushed output and new orders sharply higher and sent business confidence to its loftiest level since September 2022.
The burst of momentum marks eight consecutive months of improving conditions across the sector — yet a concurrent spike in costs and a stubbornly flat export picture are giving analysts cause for pause.
The S&P Global Vietnam Manufacturing Purchasing Managers' Index rose to 54.3 in February from 52.5 in January, reaching a four-month high and firmly consolidating the expansion that has been building since the middle of last year.
Production grew at its fastest rate since July 2024, with firms citing both stronger customer demand and preparations for imminent deliveries as the drivers of the accelerated output.
Finished goods stocks edged down only fractionally — the smallest reduction in just over two years — as products were dispatched to waiting customers almost as fast as they left the production line.
New orders rose for a sixth successive month, and at the quickest pace since last October, buoyed by improving domestic demand conditions and the acquisition of new clients. The one conspicuous gap in the otherwise positive picture was exports, which were flat on the month. A number of manufacturers pointed to instability in international markets as the reason for the stagnation in foreign sales — a factor that bears watching given how heavily Vietnam's industrial base depends on global trade.
The strength of domestic orders was sufficient to drive further growth in staffing and purchasing activity. Employment rose for the fifth month in a row and at its briskest pace since September 2022, though firms tempered their commitment by relying partly on temporary hires rather than taking on permanent workers — a sign that caution about the durability of the upturn has not entirely dissipated. Extra capacity enabled manufacturers to make solid inroads into their backlogs of unfinished work during the month.
Input buying expanded at the second-sharpest rate in a year and a half, with stocks of purchased materials ticking back into positive territory after a dip in January. Supplier delivery times lengthened again, with some manufacturers reporting customs delays on imported goods — an operational frustration that, combined with stronger demand for inputs, handed suppliers the leverage to push through higher prices.
That leverage was fully exercised. Input cost inflation jumped to its steepest since June 2022, as manufacturers absorbed both higher supplier charges and rising shipping costs. Selling prices were raised in response, with the rate of output price inflation holding at the 45-month high already reached at the start of 2026. For now, demand remains robust enough to absorb those increases — but analysts at S&P Global cautioned that the data in coming months would need to be watched closely to judge whether rising prices begin to curb appetite.
Business confidence nevertheless surged, strengthening for a fifth consecutive month to its highest since September 2022. Manufacturers grounded their optimism in expectations of continued new order growth and firming market demand — a mood that, if vindicated, would see Vietnam's factories sustain and potentially deepen their current expansion through the spring.
Andrew Harker, Economics Director at S&P Global Market Intelligence, said firms had built convincingly on January's growth with an even stronger February performance, giving the sector a positive start to 2026. He noted, however, that the stronger demand environment was already feeding through into building inflationary pressures on both costs and selling prices — a dynamic that could ultimately test the resilience of the recovery if left unchecked.
