Vietnam's manufacturing recovery gaining traction: S&P

The S&P Global Vietnam Manufacturing Purchasing Managers' Index posted 51.8 in June, down from 52.8 in May but still above the 50.0 no-change mark, reflecting an improvement in the health of the sector.

Business conditions have now strengthened on a monthly basis throughout the past year, S&P Global stated in a release on July 1.

Andrew Harker, economics director at S&P Global Market Intelligence wrote: "The Vietnamese manufacturing sector ended the first half of 2026 on a positive note, with sustained expansions of new orders and output recorded."

"Encouragingly, anecdotal evidence from the latest PMI survey suggested that growth was more driven by improving customer demand than the efforts to build safety stocks which supported growth in May. Reduced stockpiling efforts potentially reflected a marked easing of inflationary pressures during the month," he added.

Output rose for the 14th successive month, and at a marked pace that was the fastest since February. Higher new orders and rising output requirements encouraged manufacturers to expand their purchasing activity for the second month running in June.

But continued supply-chain delays meant that stocks of inputs fell sharply. Staffing levels were also down amid ongoing evidence of spare capacity in the sector.

In fact, the fall in stocks of inputs was the most marked for a year. In some cases, inputs had been used to support production growth rather than being held in stock, while challenges importing goods were also mentioned.

Indeed, sourcing inputs in general again proved difficult for firms as suppliers' delivery times lengthened further. The latest deterioration in vendor performance was only modest and the least marked in four months, however.

Input costs continued to rise sharply in June, but the rate of inflation was much softer than that seen in May and the lowest since the start of the year. Where input prices increased, panellists linked this to material supply shortages and higher transportation costs. Similarly, the rate of output price inflation also eased in June and was at a six-month low.

Contrasting with the generally positive picture in June, employment continued to decrease, the fourth month running in which this has been the case. Although modest, the latest fall was sharper than that seen in May as a number of firms reported employee resignations.

Despite lower workforce numbers, outstanding business decreased again, and at a solid pace. Manufacturers remained optimistic that output will rise over the coming year, and confidence ticked up to the highest in four months.

Hopes for further increases in new orders, new product development and efforts to expand operations were among the factors supporting optimism. That said, sentiment remained below the level seen prior to the outbreak of war in the Middle East.

"Overall, the sector goes into the second half of the yearon a positive footing, and firms should be well placed toremain in growth territory should we see a more stableinternational environment during the remainder of 2026," said Andrew Harker.

Vietnam's government has set a target of 11.9% economic growth in the second half of 2026 to achieve its goal of expanding GDP by at least 10% for the full year, according to a government resolution issued on June 27.

The target was outlined in Resolution 168, which updates the country's growth scenario and sets out key policy measures for the remainder of the year while maintaining macroeconomic stability.

On April 24, the National Assembly - the country's legislature - set a 2026-2030 agenda targeting at least 10% average annual GDP growth.