S&P Global: Vietnamese PMI decreases slightly in December

Specifically, the PMI in December stood at 49.8 compared to 50.8 in November, reflecting that the final month of the year witnessed a loss of momentum in the manufacturing sector.

The report outlines that the worsening in the health of the sector was recorded in spite of increases in output and new orders, particularly as firms scaled back their employment and stocks of purchases.

Although both output and new orders increased in December, rates of expansion were only slight and were the weakest in the respective three-month growth sequences. Some firms signaled demand improvements, while others reported that market conditions had subsequently softened.

Most notably, business confidence dropped to a 19-month low. Concerns relating to global market instability and uncertainty caused a drop in confidence regarding the year-ahead outlook for production. Accordingly, sentiment fell markedly in December and was the lowest since May 2023.

According to experts, hopes for increases in new orders, an improvement in economic conditions, and the resolution of some of the conflicts around the world meant that firms were on balance optimistic that output would expand.

Meanwhile, manufacturers moved to reduce employment for the third successive month at the end of the year amid a subdued growth of new orders. Although modest, the pace of job cuts was the sharpest since August.

The continued scaling back of employment at a time when new orders were expanding, meant that backlogs of work accumulated once again in December, extending the current sequence of rising outstanding business to seven months. That said, the latest increase was only marginal and was the weakest in this sequence.

The report states that inflationary pressures picked up in December, with both input costs and output prices rising at sharper rates compared to November. Material shortages and exchange rate fluctuations contributed to higher input costs, according to panelists, with oil and metals being among the items mentioned as rising in price.

Andrew Harker, economics director at S&P Global Market Intelligence, said, "It was a subdued end to the year for the Vietnamese manufacturing sector as growth of output and new orders slowed. Global market uncertainty also acted to depress confidence, which fell to the lowest in more than a year-and-a-half.”

“This may in part reflect the uncertain picture with regards to plans by the incoming US administration around tariffs. Further announcements on this in the new year will help to provide clarity on any potential impacts on Vietnamese manufacturers,” he noted.