Vietnam November factory activity weakest in five months: S&P Global

Vietnam’s Manufacturing Purchasing Managers' Index (PMI), which measures the country’s factory activity, dropped to a five-month low of 47.3 in November from 49.6 in October, as new orders fell for the first time in four months.

The index signaled a solid monthly deterioration of business conditions in the sector, extending the current sequence of decline to three months in the process, S&P Global said in its latest monthly report.

Manufacturers faced a renewed reduction in new orders during November, thereby ending a three-month sequence of growth. The pace of decline was solid and the most marked since May.

Weaker customer demand was reportedly behind the fall in new business. Waning demand extended to international customers as new export business decreased for the first time in four months, partly because of some resistance among customers to price rises.

With new orders falling and economic conditions challenging, firms scaled back production again. Output has now decreased in each of the past three months. Moreover, the rate of contraction accelerated sharply and was the most pronounced since May, says the report.

Falling new orders, reduced production requirements and a further drop in backlogs of work meant that manufacturers looked to scale back their purchasing activity and employment in November.

Although firms expect output to rise over the coming year amid hopes for an improvement in new orders, business confidence dipped for the second consecutive month and was below the series average.

“Demand weakness, both domestically and in international markets, led to retrenchment across the Vietnamese manufacturing sector in November. With new orders down, firms scaled back their production, employment and purchasing activity, plus limited inventory holdings,” Andrew Harker, economics director at S&P Global Market Intelligence, commented.

Meanwhile, data from the government-run General Statistics Office showed that Vietnam’s industrial sector continued its recovery, with the index of industrial production up 3% in November from October.