PMI signals sustained deterioration in Vietnam's manufacturing health

04 Jul '23

3 min read

Pic: Dong Nhat Huy / Shutterstock.co

Insights

Vietnamese manufacturers continued to struggle in the face of weak market demand towards June end, S&P Global said.
Output and new orders fell again, and weak demand led firms to scale back their staffing levels and purchasing activity, while prices fell.
With a solid decline in operating conditions in May, production was down across each goods category.

Manufacturers in Vietnam continued to struggle in the face of weak market demand as the second quarter (Q2) drew to a close this year, according to S&P Global. Output and new orders fell again, and weak demand led firms to scale back their staffing levels and purchasing activity, while prices decreased.

A lack of pressure on capacity resulted in the second-largest shortening of suppliers' delivery times on record since March 2011.

The S&P Global Vietnam manufacturing purchasing managers' index (PMI) posted below the 50 no-change mark for the fourth month running in June, signalling a sustained deterioration in the health of the sector.

At 46.2, up from 45.3 in May, the latest reading pointed to a solid decline in operating conditions. Reports of demand weakness were prevalent throughout the latest survey, with deteriorating market conditions the primary cause of the latest reduction in new orders.

Total new business was down for the fourth successive month, and at a solid pace which was nonetheless much softer than that seen in May.

New export orders decreased more quickly than total new business amid declining demand in international markets.

Demand weakness fed through to a further reduction in manufacturing production, while there were also a number of reports that power outages due to the heatwave in Vietnam had restricted output.

Production was down across each goods category, with the overall pace of reduction remaining solid. The fall in new orders meant that backlogs of work continued to decrease, while manufacturers responded to reductions in workloads by lowering their employment levels and purchasing activity.

Employment was down for the fourth consecutive month, and at a marked pace that was stronger than that seen in May. Purchasing activity was likewise reduced for the fourth month running, albeit only marginally at the end of the second quarter.

The reduction in input buying and lower new orders led to a drop in stocks of purchases. Stocks of finished goods also declined as production volumes eased, the second successive month in which this has been the case.

The weak demand environment acted to ease pressure on prices in June. Output prices were down for the third month running, with the latest cut to charges the most pronounced in just over three years.

As well as reducing pressure on prices, the lack of demand throughout the manufacturing sector also led to spare capacity in supply chains. Suppliers' delivery times shortened to the greatest extent in almost 12 years, and to the second largest degree since the survey began in March 2011.

Fibre2Fashion News Desk (DS)

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