Vietnam’s August factory activity improves for 5th straight month: S&P Global

Manufacturing activity in Vietnam continued to expand in August, extending its improving streak for a fifth month in a row, but at a slower pace, with further expansions in output and new orders, according to S&P Global.

Vietnam’s Manufacturing Purchasing Managers' Index (PMI) posted 52.4 in August, down from 54.7 in July but still signaling a solid monthly improvement in business conditions midway through the third quarter.

Operating conditions have now strengthened in each of the past five months, S&P Global said in a monthly report. The index rose back above the 50.0 no-change mark in April which posted 50.3 from 49.9 in March.

The improvement in the health of the sector reflected further rapid increases in output and new orders, with the respective rates of expansion remaining sharp despite easing from the particularly elevated rates seen in June and July.

Improvements in customer demand resulted in growth of new orders, with firms raising production accordingly. New export orders rose for the fifth month running.

While both input costs and selling prices continued to increase, rates of inflation slowed markedly from July to the weakest in four months.

Strong growth of new orders and softer cost pressures led manufacturers to increase purchasing activity sharply during August. Moreover, the rate of growth quickened for the fourth month running to the fastest since May 2022.

In contrast to the picture regarding purchasing activity, manufacturers recorded a drop in employment for the first time in three months amid resignations and the ending of some temporary contracts.

Manufacturers remained optimistic that output will increase over the coming year, based on expectations of further improvements in customer demand and new orders. However, sentiment dropped for the second month running, and was the lowest since January.

“As expected, the Vietnamese manufacturing sector saw a slowdown in growth of output and new orders from the particularly elevated rates seen in June and July. Those increases were always going to be hard to sustain and rates of expansion remained marked, so there is little cause for concern on that front,” said Andrew Harker, economics director at S&P Global Market Intelligence.

"The news was better in terms of inflation, with both input costs and output prices rising at much weaker rates in August. In fact, this was reportedly a factor contributing to sustained new order growth,” he added.

Vietnam’s index of industrial production grew 8.5% in year-on-year in January-July, driven by the manufacturing sector (up 9.7%), according to government data. The data for August is due on Friday (August 6) due to a schedule change.