Vietnam PMI's declines slightly amid muted new order growth: SP Global

Production falls for second month running

Specifically, the PMI remained below the 50.0 no-change mark during October, dipping to 49.6 from 49.7 recorded in September, a second consecutive monthly deterioration.

The report points out that overall business conditions in the Vietnamese manufacturing sector deteriorated slightly in October as firms continued to scale back production despite modest improvements recorded in new orders.

Meanwhile, employment stabilised after a period of job shedding and firms continued to increase their purchasing activity amid a positive outlook in the year ahead.

A combination of higher oil prices coupled with currency weaknesses led the pace of input cost inflation to accelerate for the second month running, with output prices increasing accordingly.

The report outlines that central to the latest decline in business conditions was a further reduction in manufacturing output, the second in many months.

The latest fall was only slight as some firms increased production to meet new orders, but on balance firms were able to cater to customer requirements without further expanding their output.

The report states that new orders increased for the third consecutive month amid some signs of improvement in customer demand.

Employment stabilises

Employment was broadly unchanged at the start of the final quarter of the year, thereby ending a seven-month sequence of falling staffing levels. Those that increased their workforce numbers did so in response to higher new orders, while there remained a climate of optimism about the year ahead outlook for production.

The stability of employment and ongoing spare capacity in the sector enabled manufacturers to reduce their backlogs of work markedly in October, with the rate of depletion being the strongest since June 2021.

Input cost inflation at eight-month high

A further build-up of inflationary pressures was signaled at the start of the fourth quarter, with both input costs and output prices rising at sharper rates.

Moreover, the respective rates of inflation each hit eight-month highs. The impact of rising oil prices was widely mentioned as having pushed up input costs, with higher prices for fuel and plastics among those feeding on from rises in the cost of oil.

“PMI data for the start of the final quarter of the year painted a similar picture to that for the end of the third quarter. New orders continued to rise, but only at a modest pace and one which wasn't sufficient to encourage firms to expand their production. Instead, manufacturers were content to draw down inventories of finished products to satisfy demand,” said Andrew Harker, economics director at S&P Global Market Intelligence.

"There was some more positive news on the employment front as a seven-month period of job cutting came to an end. This, along with rising purchasing and positive sentiment, suggests that firms are becoming more confident that recent demand improvements will be sustained in the months ahead,” he added.

"The other noteworthy development in October was a further intensification of inflationary pressures, with higher oil prices and currency weakness pushing up input costs," he noted.