Business conditions in Vietnam's manufacturing sector deteriorate in Jan, new orders drop

The S&P Global Vietnam Manufacturing Purchasing Managers' Index (PMI) fell to 48.9 in January, the second month in a row below the 50-point no-change mark.

In a Monday statement, S&P Global said the index of Vietnam fell from 50.8 in November 2024 and 49.8 in December 2024.

“The deterioration in operating conditions was modest, but slightly more pronounced than was the case in the previous survey period,” S&P Global added.

Business conditions in the Vietnamese manufacturing sector deteriorated in the opening month of 2025 amid renewed falls in both output and new orders. 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, according to S&P Global.

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.

“Falling new orders meant that there was a degree of spare capacity in the Vietnamese manufacturing sector. Firms were therefore able to deplete backlogs of work for the first time in eight months,” S&P Global highlighted.

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.

Andrew Harker, economics director at S&P Global Market Intelligence, pointed out: "Manufacturers will be hoping that conditions begin to improve soon, and were at least more optimistic than was the case at the end of 2024. S&P Global Market Intelligence forecasts 4.6% growth of industrial production in 2025."

Vietnam’s index of industrial production (IIP) grew 8.4% year-on-year in 2024, according to the General Statistics Office (GSO).

The whole-2024 figure outpaced the tallies recorded since the turn of the decade with 3.3% in 2020, 4.7% in 2021, 7.4% in 2022, and 1.3% in 2023.