New orders fall for second straight month in Vietnam amid subdued demand: S&P Global

The Vietnamese manufacturing sector continued to see weak demand in February, which led to further reductions in new orders and production, according to S&P Global.

The latest reading was reflective of a slight deterioration in business conditions over the course of the month. After having fallen for the first time in four months during January, new orders decreased again in February, the firm said in a release on Monday.

As a result, firms scaled back employment again. On the price front, the pace of input cost inflation eased to a 19-month low and charges were reduced for the second month running.

The S&P Global Vietnam Manufacturing Purchasing Managers' Index (PMI) was below the 50.0 no-change mark for the third consecutive month in February, despite rising slightly to 49.2 from 48.9 in January.

The rate of contraction was modest but quickened to the fastest since last September. Panellists reported demand weakness both domestically and internationally. Muted export demand was highlighted by a further solid decline in new business from abroad, the fourth reduction in as many months.

Andrew Harker, economics director at S&P Global Market Intelligence, said: "Manufacturers in Vietnam reported subdued demand conditions again in February, with the sector struggling to gain momentum in 2025 so far. On a more positive note, firms were increasingly optimistic about the future path of output, although confidence was often based on hopes that economic conditions will be stable in the months ahead.

"Issues with transportation was a key headwind for the sector in February, with respondents citing problems with the speed and availability of freight, as well as higher costs. Firms will be hoping to see an alleviation of these supply-side constraints, alongside demand improvements, as the year progresses."

In line with the picture for new orders, manufacturing production also decreased for the second successive month in February.

Shortages of new work also led some firms to hold off on replacing departing staff, thereby resulting in a fifth consecutive fall in employment. The rate of job cuts eased from January, however.

Despite the reduction in workforce numbers, there remained evidence of spare capacity in the sector amid falling new orders. Outstanding business decreased markedly, and to the largest extent in 16 months.

Bucking the wider trends across the sector during February, purchasing activity increased slightly. In some cases, rising input buying reflected confidence in the upcoming path of manufacturing output.

In fact, business confidence strengthened for the second monthin a row to the highest since June last year. Firms hope for stable economic conditions to support an improvement in new orders and thus production growth, S&P Global wrote.

Another factor behind the rise in purchasing activity seen in February was a desire to make sure materials were secured amid uncertainty around availability and supply-chain delays.

Suppliers' delivery times lengthened again, continuing the sequence of deteriorating vendor performance which beganin September 2024. Moreover, the latest lengthening of lead times was marked and the most pronounced in five months, it noted.

Panellists reported issues with both the availability and speed of transportation. Delivery delays, plus the use of inputs to support production, meant that stocks of purchases continued to fall despite an increase in buying.

Stocks of finished goods were also down amid falling production and efforts to draw down inventories amid lower new orders. As well as reporting shortages of transportation, firms also indicated that freight costs increased.

"Alongside higher raw material prices, this meant that input costs rose again in February. That said, the pace of inflation was the weakest in the current 19-month sequence of increase and below the series average.

"In contrast to the rise in input costs, manufacturers lowered their selling prices for the second consecutive month inresponse to a weak demand environment. The fall was slightbut faster than in January," it added.

Tim Leelahaphan, senior economist, Vietnam and Thailand, Standard Chartered Bank, commented in a talk with local media on February 20:

"In the first half, we expect the economy to continue recovering from last year. The country did quite well in 2024, growing 7.07%. I think once we enter the second quarter, we should have details of U.S. trade policy: Whether it would be a universal tariff on some products or a higher tariff on China, whether it would be a bilateral or reciprocal tariff on some nations, and whether Vietnam would still be free from the tariff or Vietnam ultimately would be taxed by the U.S. administration.

There are many uncertainties in the arena of trade, that's why we expect the first half to continue seeing strong growth from last year. But once entering the second quarter, the global trade environment might not be that supportive, and that's why we have some reservations in the second half of the year."