Vietnamese manufacturers experienced a return to growth at the beginning of 2024, driven by tentative signs of increased demand leading to a resurgence in new orders and production.
The S&P Global Vietnam Manufacturing Purchasing Managers’ Index crossed the 50-point threshold, indicating a shift from contraction to expansion at the start of the year, rising from 48.9 points in December to 50.3 points. While this marked the first improvement in the manufacturing sector’s health in five months, it remained marginal.
The overall enhancement in business conditions centered around renewed expansions in new orders and production. Total new business saw its first increase in three months, reflecting a recovery in demand both domestically and in export markets. New export orders expanded for the first time since October.
Consequently, companies increased their production volumes, ending a four-month decline. Though the rise was modest, it was the most significant since September 2022, particularly led by intermediate goods producers.
The modest increases in output and new orders meant that firms maintained their staffing levels and purchasing activity relatively unchanged at the beginning of 2024.
The combination of this stable operational scenario and a renewed rise in new orders led to the accumulation of backlogs of work for the second consecutive month in January. Although slight, the rate of accumulation was the most pronounced since March 2022.
Some firms opted to meet orders by distributing finished goods to customers, resulting in a decrease in post-production inventories after no change at the end of 2023.
Andrew Harker, Economics Director at S&P Global Market Intelligence, commented, “It was an encouraging start to 2024 for the Vietnamese manufacturing sector, with some welcome improvements in new orders and production. The respective increases were only marginal, however, and not sufficient to entice firms to take on additional staff or expand purchasing. The lack of an expansion to operating capacity meant that backlogs of work continued to build.”
According to S&P Global, confidence in the year-ahead outlook for production dropped to a seven-month low and fell below the series average as some firms expressed concerns about economic conditions. Nevertheless, manufacturers remained optimistic overall, anticipating improvements in demand, customer numbers, and the planned launch of new products.