The report released on March 3 shows that the S&P Global Vietnam Manufacturing PMI stood at 49.2 in February, below the 50.0 no-change mark for the third consecutive month, indicating a “slight deterioration in business conditions”.

Key challenges included weakening demand, leading to decreased new orders and production, and subsequent employment reductions.

New orders fell for the second consecutive month, with the rate of contraction accelerating to the fastest since last September. This decline was attributed to “demand weakness both domestically and internationally”. Specifically, “Muted export demand was highlighted by a further solid decline in new business from abroad, the fourth reduction in as many months,” says the report.

Reflecting the decline in new orders, manufacturing production also decreased for the second consecutive month. In the fact of shortages of new work, firms continued to reduce employment for the fifth consecutive month.

Despite these headwinds, business confidence is strengthening, and purchasing activity increased slightly, driven by hopes for future economic stability and concerns regarding supply chain disruptions.

“Bucking the wider trends across the sector during February, purchasing activity increased slightly”, says the report, adding this rise was driven by both optimism and concerns.

“In some cases, rising input buying reflected confidence in the upcoming path of manufacturing output...Another factor behind the rise in purchasing activity seen in February was a desire to make sure materials were secured amid uncertainty around availability and supply-chain delays.”

According to the report, suppliers' delivery times lengthened, continuing a trend since September 2024. “Moreover, the latest lengthening of lead times was marked and the most pronounced in five months. Panellists reported issues with both the availability and speed of transportation.”

Delivery delays, plus the use of inputs to support production, meant that stocks of purchases continued to fall despite an increase in buying. Stocks of finished goods were also down amid falling production and efforts to draw down inventories amid lower new orders.

Input costs continued to rise, driven by transportation shortages and higher raw material prices. Faced with weak demand, manufacturers reduced their selling prices for the second month running. The fall was slight but faster than in January.

Despite the current challenges, the report indicates, business confidence strengthened for the second consecutive month, reaching its highest level since June last year.

“Firms hope for stable economic conditions to support an improvement in new orders and thus production growth.”

“Manufacturers in Vietnam reported subdued demand conditions again in February, with the sector struggling to gain momentum in 2025 so far. On a more positive note, firms were increasingly optimistic about the future path of output, although confidence was often based on hopes that economic conditions will be stable in the months ahead,” said Andrew Harker, Economics Director at S&P Global Market Intelligence.

“Issues with transportation was a key headwind for the sector in February, with respondents citing problems with the speed and availability of freight, as well as higher costs. Firms will be hoping to see an alleviation of these supply-side constraints, alongside demand improvements, as the year progresses.”

Firms maintain optimistic outlook for production despite PMI drop in January

VOV.VN - Despite the S&P Global Vietnam Manufacturing Purchasing Managers' Index (PMI) dropping a bit in January 2025 compared to the previous month, firms have maintained an optimistic outlook for production this year.