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.
According to the latest report released by S&P Global on February 3, the PMI was at 48.9 in January, down from 49.8 in December and below the 50.0 no-change mark for the second successive month.
The report outlined that business conditions in the Vietnamese manufacturing sector deteriorated in the opening month of the year amid renewed falls in both output and new orders.
The reduction in new orders has duly fed through to a fall in production, also for the first time in four months. As was the case with new business, however, the rate of decline in output was only slight.
Experts pointed out that manufacturers also continued to scale back employment, with staffing levels down for the fourth consecutive month. Moreover, the rate of job shedding remained solid and at its most pronounced level since May last year.
On the other hand, purchasing activity increased, albeit marginally. Respondents indicated a desire to make sure that sufficient inputs were secured in order to support production needs.
However, firms continued to face delays when it came to securing materials, with suppliers' delivery times lengthening for the fifth month running. Slow transportation and higher shipping costs were behind longer lead times, according to panelists.
Meanwhile, the rate of input cost inflation slowed in January and was at its weakest in the current 18-month sequence of rising input prices. Where input costs did rise, firms linked this to higher prices for raw materials and transportation.
Softer cost inflation gave manufacturers the room to lower their selling prices in a bid to boost fragile customer demand, whilst output prices decreased for the first time in nine months, albeit marginally.
In spite of facing numerous difficulties, firms have maintained an optimistic outlook for production over the coming year, with sentiment recovering from the 19-month low posted in December. More than 36% of respondents predict a rise in output over the next 12 months, linked to hopes of a recovery in market demand.
“Vietnamese manufacturers endured a disappointing start to 2025, with subdued demand conditions leading to renewed falls in both new orders and output and a more pronounced scaling back of employment. There was some respite on the price front, however, with slower cost inflation enabling firms to reduce their own selling prices in order to boost demand,” said Andrew Harker, economics director at S&P Global Market Intelligence.
“"Manufacturers will be hoping that conditions begin to improve soon, and were at least more optimistic than was the case at the end of 2024. S&P Global Market Intelligence forecasts 4.6% growth of industrial production in 2025," he added.
