Decline in new orders slows as exports return to growth: S&P Global

The report outlined that production and new orders continued to endure a decline, albeit at a slower rate, despite some signs of improvement. This can largely be seen through growing demand which has been helped by a renewed expansion in new export orders.

Employment also decreased at a slower pace, while the rate of input cost inflation continued to accelerate, reaching a six-month high in the process. In turn, firms moved to increase their own selling prices for the first time in three months.

The S&P Global Vietnam Manufacturing Purchasing Managers' Index™ (PMI®) posted 47.4 in January, up from 46.4 in December, but still pointing to a solid monthly deterioration in terms of the overall health of the manufacturing sector.

Operating conditions have now worsened in each of the past three months. In line with this, January data signaled a further marked decline in manufacturing production, albeit one that was slightly softer than what was recorded in December.

Lower new orders were often behind falling output, with some businesses indicating that customers had sufficient stock holdings, meaning they didn't need to make purchases at present.

Experts pointed out that total new orders had fallen for the third consecutive month in January as demand conditions remained challenging. However, there were some signs of improvement, particularly with regards to new export orders which rose for the first time in the reviewed period. As such, the total number of new business fell at a modest pace, the lowest in the current period of decline.

The rate of input cost inflation accelerated for the fifth successive month in January to mark the fastest rise since last July. Where input prices rose, experts mentioned higher supplier charges, increased import costs, and a rise in taxes.

Suppliers' delivery times also shortened marginally, following slightly longer lead times in the two preceding months, with muted demand for inputs helping suppliers to speed up deliveries.

Furthermore, business confidence improved to a three-month high amid hopes that demand conditions will strengthen over the course of the year, thereby feeding through to growth of output. The relaxation of pandemic restrictions in China can be viewed as another factor behind the positive outlook, with more than half of respondents being optimistic that production will rise over the next 12 months.

Andrew Harker, economics director at S&P Global Market Intelligence, said, “Although demand conditions for Vietnamese manufacturing firms remained challenging at the start of 2023, leading to further declines in output, new orders and employment, there were some more positive signs from the latest PMI survey. One of the main positives in January was a renewed expansion in new export orders, with the decline in total new business softening as a result. “

“The loosening of COVID-19 restrictions in China, plus signs that downturns in Europe and the US may be less severe than feared, provided optimism that growth in Vietnam could be around the corner. Indeed, business confidence improved to a three-month high at the start of the year. S&P Global Market Intelligence is forecasting a rise in industrial production of 6.6% in 2023”, he added.