The Vietnamese manufacturing sector improved in July against June but its Manufacturing Purchasing Managers' Index (PMI) is still under 50, which separates expansion from contraction, S&P Global said Tuesday.
Vietnam’s July PMI was 48.7, up from 46.2 in June and 45.3 in May. The trend in the headline index was matched by a number of the S&P Global survey’s sub-indices in July, with rates of contraction in output, new orders and employment the weakest in the respective sequences of reduction which stretch back to March in all cases.
“The Vietnamese manufacturing sector remained under pressure in July, according to the latest PMI data, with firms again struggling to secure new business and scaling back output accordingly. Despite the latest drop in production firms were still left with unsold stock,” Andrew Harker, economics director at S&P Global Market Intelligence, said in a release.
“Meanwhile, there were again falls in prices and a shortening of suppliers' delivery times amid widespread spare capacity in the sector. On a more positive note, there were signs that demand may be stabilizing as new orders fell at the softest pace in five months. Firms will be hoping that this may feed through to renewed growth of orders in the months ahead,” he said.
In particular, new orders decreased only marginally in July amid some signs of demand stabilizing. This means manufacturers signaled that demand remained subdued overall, particularly in export markets.
Highlighting the particular weakness internationally, new export orders fell much more quickly than total new business. Some firms pointed to declines in new orders from European customers, according to the S&P Global report.
With new orders still declining, firms in Vietnam scaled back production again in July, although the alleviation of the problem of power outages which were prevalent in June contributed to the pace of contraction softening since the previous survey period, said the U.S. provider of financial information and analytics.
Manufacturers in the Southeast Asian country also lowered employment for the fifth month in a row, but at a modest pace, the company said.
“Business confidence picked up to a four-month high in July, but remained relatively muted, the report said.
“Firms hope that an eventual recovery in customer demand will feed through to renewed production growth, but remained concerned by the current challenges in securing new business.”
Vietnam’s index of industrial production (IIP) increased by 3.9% in July against June and by 3.7% year-on-year, the country’s General Statistics Office announced Saturday.
However, in the first seven months of the year, the index, which is based on growth rates of different industry groups, decreased 0.7% year-on-year due to prolonged economic headwinds and weak demand worldwide, the government agency said. The index had expanded 8.6% year-on-year in the January-July period last year.