Vietnam manufacturing sector falls into decline: S&P Global

Weakening global economic conditions have dragged down Vietnam’s production sector, ending a 13-month period of expansion, according to S&P Global.

The S&P Global Vietnam manufacturing purchasing managers’ index for November was 47.4, down from 50.6 in October and 52.5 in September.

The latest result is under the boom-or-bust line of 50 that separates expansion from contraction. The reading signaled a global solid deterioration in business conditions during the month, the global market information and analytics provider said.

“The picture has darkened considerably in November, with new orders, exports, output, employment and purchasing activity all posting renewed contractions. With business confidence also slumping, the sector appears to be enduring a tough end to 2022,” Andrew Harker, economics director at S&P Global Market Intelligence, said in a release.

New export orders decreased more quickly than total new business, according to S&P Global. With new orders falling, Vietnamese manufacturers also lowered production, the first decline since March.

The fall in input buying ended a 13-month sequence of growth and fed through to a second successive reduction in stocks of purchases. Post-production inventories also decreased. Reduced demand for inputs helped some suppliers to speed up their deliveries in November.

Currency depreciation also affected manufacturers during November, leading to a slightly faster rise in input costs. Meanwhile, output prices decreased for the first time since August 2020.

S&P Global said panelists indicated that currency depreciation against the U.S. dollar had been a key factor behind the rise in input prices.

According to the global agency, business confidence dropped in Vietnam in November due to falling new orders and concerns about international demand. Sentiment was down to the lowest in 14 months. Hopes for a recovery in demand over the coming year meant that some firms remained optimistic in the 12-month outlook for production.