Vietnam factory activity rises for first time in five months ahead of Lunar New Year holiday: S&P

Vietnam’s Manufacturing Purchasing Managers' Index (PMI) moved back above the 50.0 no-change mark in January, rising to 50.3 from 48.9 in December, buoyed by increases in new orders and output in the lead up to the Lunar New Year (Tet) holiday, said S&P Global.

The reading pointed to a first improvement in the health of the manufacturing sector for five months.

The overall improvement in business conditions was centered on renewed expansions in new orders and production. The rise in total new business was the first in three months amid signs of demand recovering in both domestic and export markets (new export orders also expanded for the first time since last October).

Consequently, firms increased their production volumes, thereby ending a four-month sequence of declines. The rise was slight, but the most marked since September 2022. The overall expansion in output was centered on intermediate goods producers.

The slight nature of the increases in output and new orders meant that firms kept their staffing levels and purchasing activity broadly unchanged at the start of 2024.

Some firms opted to satisfy orders by distributing finished goods to customers. As a result, post-production inventories decreased following no change at the end of 2023.

Stocks of purchases also decreased amid a combination of rising production requirements and broadly unchanged purchasing activity. The reduction in pre-production inventories was solid and the steepest since June last year.

S&P Global noted that confidence in the year ahead outlook for production dropped to a seven-month low and was below the series average as some firms expressed worries about economic conditions. Manufacturers remained optimistic overall, however, amid hopes of improvements in demand and customer numbers, plus the planned launch of new products.

“It was an encouraging start to 2024 for the Vietnamese manufacturing sector, with some welcome improvements in new orders and production,” said Andrew Harker, economics director at S&P Global Market Intelligence.

Harker stressed the respective increases were only marginal and not sufficient to entice firms to take on additional staff or expand purchasing.

Vietnam’s index of industrial production increased 18.3% year-on-year in January but fell 4.4% month-on-month, the General Statistics Office reported Monday.