Vietnamese manufacturing sector's health further slightly strengthened: S&P Global

Business conditions in the Vietnamese manufacturing sector continued to improve slightly in September amid a renewed expansion of new orders, according to S&P Global.

Output and purchasing activity also increased, but firms continued to lower their staffing levels. The S&P Global Vietnam Manufacturing Purchasing Managers' Index (PMI) was unchanged at 50.4 in September, signalling a further slight strengthening in the health of the sector.

Operating conditions have now improved in three consecutive months. Helping to support overall business conditions in September was a renewed increase in new orders following a slight fall in August. That said, the rate of expansion was only marginal.

Andrew Harker, economics director at S&P Global Market Intelligence, said: "There was good news on the demand front for Vietnamese manufacturers in September as new orders returned to growth and even exports, which have been falling continuously since late last year, showed signs of stabilizing."

The more certain picture regarding tariffs appears to have helped the demand environment for Vietnamese firms. Greater stability is also expected to help support growth over the coming year, but confidence among firms remains relatively subdued at present given the recent muted demand picture, according to Harker.

"Something to watch out for in the months ahead is the picture around inflation. Rates of increase in firms' input costs and selling prices have been steadily strengthening in recent months. If this trend continues, we may start to see price pressures restricting demand," he added.

Reports presented at a meeting of the Government Standing Committee on the socio-economic situation on Thursday, chaired by Prime Minister Pham Minh Chinh, show that Vietnam's economic growth is estimated to reach "a high level" in the first nine months of the year, with the macro economy being stable, inflation controlled, and major balances guaranteed.

According to S&P Global, new export orders in September continued to fall, but the pace of contraction eased to the weakest in the current 11-month sequence of decline. International demand reportedly remained muted, but stability in US tariff policies reportedly helped some firms to secure new business from abroad.

With overall new orders rising on the back of improving customer demand, manufacturers continued to increase their production volumes at the end of the third quarter, thereby extending the current sequence of growth to five months.

The rate of expansion was solid, but eased to the weakest since June. The latest rise in output was partly reflective of reductions in backlogs of work, which decreased markedly in September and to the largest degree in five months.

Meanwhile, manufacturers continued to scale back workforce numbers, extending the current sequence of monthly falls to one year.

On a more positive note, firms increased their purchasing activity for the third month running amid higher output requirements.

The use of purchased items to support production meant that stocks of inputs continued to fall, however. Stocks of finished goods were also down, and to the largest extent since July 2024.

Suppliers' delivery times lengthened for the 13th month running in September, albeit only modestly and to the smallest degree in four months.

The latest increase in input costs was the fastest since July 2024 and linked by respondents to higher market prices and unfavorable exchange rate movements.

In turn, selling prices also rose at the fastest pace in 14 months. A more stable economic environment is expected to help lead to higher new orders and subsequently an increase in output over the coming year.

Public sector investment is also predicted to support growth. While firms remained optimistic about the year-ahead outlook, the level of sentiment dropped from August and was weaker than the series average.

According to the Asian Development Bank (ADB), Vietnam's economy remains resilient to increasing uncertainties and high U.S. tariffs thanks to solid domestic demand.

In its September Asian Development Outlook (ADO) released on September 30, the bank revised Vietnam’s economic growth forecast, raising it to 6.7% in 2025 and adjusting to 6% in 2026. Inflation projections are slightly below the previous estimates published in April this year.

The Vietnamese government targets a GDP growth rate of 8.3-8.5% for 2025 and double-digit expansion for 2026-2030. According to the Prime Minister’s Policy Advisory Council", the target is "appropriate" given the favorable macroeconomic conditions and structural reforms.