Firms responded to lower workloads by scaling back employment and reducing stocks of both purchases and finished goods.
Meanwhile, the rate of input cost inflation softened, providing some opportunity for firms to lower selling prices as part of efforts to stimulate demand.
The deterioration in operating conditions was modest, but slightly more pronounced than was the case in the previous survey period.
New orders decreased for the first time in four months during January amid reports from panellists of subdued customer demand.
The drop in total new business in part reflected a reduction in new export orders, which decreased for the third month running.
The reduction in new orders fed through to a fall in production, also for the first time in four months. As was the case with new business, however, the rate of decline in output was only slight.
Falling new orders meant that there was a degree of spare capacity in the country’s manufacturing sector. Firms were, therefore, able to deplete backlogs of work for the first time in eight months.
Manufacturers also continued to scale back employment, with staffing levels down for the fourth consecutive month. Moreover, the rate of job shedding was solid and the most pronounced since May last year, a release from S&P Global said.
On the other hand, purchasing activity increased, albeit marginally. Respondents indicated a desire to make sure that sufficient inputs were secured in order to support production needs.
Firms continued to face delays in securing materials, with suppliers' delivery times lengthening for the fifth month running. Slow transportation and higher shipping costs were behind longer lead times.
Vietnamese manufacturers showed a reluctance to hold inventories at the start of the year, with stocks of both purchases and finished goods falling solidly. In particular, the decline in post-production inventories was the fastest since last July and among the most pronounced on record.
The rate of input cost inflation slowed in January and was the weakest in the current 18-month sequence of rising input prices. The increase was also below the series average.
Where input costs did rise, firms linked this to higher prices for raw materials and transportation. Softer cost inflation gave manufacturers the room to lower their selling prices to boost fragile customer demand.
Output prices decreased for the first time in nine months, albeit marginally.
Firms maintained an optimistic outlook for production over the coming year, with sentiment recovering from the 19-month low posted in December. More than 36 per cent of respondents predicted a rise in output over the next 12 months, linked to hopes of a recovery in market demand.
Fibre2Fashion News Desk (DS)