Manufacturing is poised to see growth this year, fueled by expectations of recovery in both domestic and export markets, coupled with expansion plans, as per S&P Global reports.
The S&P Global Vietnam Manufacturing Purchasing Managers’ Index (PMI) recorded 48.9 points in December, indicating a fourth consecutive monthly decline in business conditions within the sector. While the index remained below 50, signaling a downturn, it did show an improvement from November’s 47.3 points.
The sector faced challenges throughout 2023, experiencing improvements only in February and August. The average PMI reading for the year was the lowest since the onset of the COVID-19 pandemic in 2020.
The recent decline in operating conditions primarily reflected subdued demand, with total new orders decreasing for the second consecutive month in December. However, the pace of reduction slowed compared to November, approaching stabilization for new export orders.
Anecdotal evidence suggested that recent price increases had dissuaded customers, contributing to the decline in new orders. Responding to these signals, manufacturers restrained the extent of selling price hikes in December, making only marginal increases, marking the least extensive inflation in the past five months.
The slight rise in selling prices contrasted with the notable increase in input costs, which continued to rise significantly, maintaining a pace similar to the nine-month high seen in November.
Andrew Harker, economics director at S&P Global Market Intelligence, commented, “The final month of the year was indicative of the picture for much of 2023 in the Vietnamese manufacturing sector, with subdued demand limiting production volumes. Firms responded to demand weakness by restricting price rises in December to try and help stimulate new business. This was despite a further marked increase in their own input costs.”
Attention is now on the prospects for 2024, with firms generally optimistic about output expansion. Despite the decline in new orders, there is a broad stability in employment and purchasing activity as manufacturers aim to maintain capacity in anticipation of better times ahead.
