Vietnam's production rises for four straight months, new export orders continue to fall: S&P Global

Production continued to increase in the Vietnamese manufacturing sector during August, the fourth consecutive month, but at a slower pace amid a subdued demand environment, according to S&P Global.

New orders decreased following a return to growth in July, contributing to a further fall in employment amid evidence of spare capacity, the company said in a release on Wednesday.

S&P Global's latest survey shows that some firms mentioned raw material scarcity, which was partly behind a lengthening of suppliers' delivery times and the sharpest rise in input costs in the year-to-date.

The S&P Global Vietnam Manufacturing Purchasing Managers' Index (PMI) remained above the 50.0 no change mark in August and signalled a second consecutive monthly improvement in the health of the manufacturing sector.

That said, at 50.4, the PMI was down from 52.4 in July and registered only a marginal strengthening in business conditions.

Andrew Harker, economics director at S&P Global Market Intelligence, wrote: "While it was positive to see output expand again during August, a renewed fall in new orders calls into question how long firms will be able to keep increasing production. The drop in new sales was led by exports, which decreased solidly again as issues around tariffs continued to impact the sector."

"With the path ahead for tariffs seeming more stable now, the predicted improvements in demand will hopefully materialize in the months ahead, helping to maintain production growth in the sector."

The main positive from the latest survey was a sustained expansion of manufacturing production, with growth recorded for the fourth month running.

The increase in August was solid, albeit slower than that seen in July. Those firms that raised output did so in response to positive new order inflows at their units, while the slowdown in the upturn reflected reports of a subdued demand environment.

New orders decreased in August, after having risen for the first time in four months during July. Demand conditions were reportedly muted, in part due to U.S. tariffs.

Issues around tariffs meant that new export orders continued to fall, the 10th month running in which this has been the case.

The solid reduction seen in August was sharper than that seen for total new business.

With new orders down, manufacturers again scaled back their workforce numbers midway through Q3. Employment decreased for the 11th successive month, and at a modest pace. The drop in new orders, however, meant that spare capacity remained evident in the sector.

Backlogs of work fell markedly, and to the largest degree since April. Stocks of finished goods were also down as firms reported a reluctance to hold inventories at a time of falling new orders, and the dispatch of finished products to customers.

While manufacturers reduced their staffing levels and stocks of finished goods, an increase in purchasing activity was recorded for the second month running, linked by panellists to higher output requirements and efforts to build stocks ahead of an expected improvement in demand.

Stocks of purchases fell, however, amid reports of a reduction of imports. Material scarcity also impacted efforts to secure inputs, with suppliers' delivery times lengthening solidly.

Material shortages, tariffs and increased transportation costs meant that input prices increased again in August. The rate of inflation ticked higher and was the fastest in 2025 sofar, albeit remaining weaker than the series average.

Output prices rose for the third month running on the back of higher taxes and the pass through of increased input coststo customers. Charges were up modestly, and at a broadly similar pace to that seen in July.

Finally, business confidence strengthened to a six-month high in August, albeit remaining below the series average. A number of respondents predicted an improvement in new orders over the coming year, supporting optimism around output. On the other hand, concerns around global economic conditions limited confidence.

The Government in early August requested the State Bank of Vietnam to proactively adjust the credit growth aim for this year in line with a GDP expansion target of 8.3-8.5%.

The target is higher than the "at least 8%" set by the National Assembly, the country's legislature, early this year.

Standard Chartered on July 24 revised its 2025 GDP growth projection for Vietnam to 6.1%, down from 6.7% early this year. The country's economic expansion might slow to 4.9% year-on-year in H2, from 7.5% in H1, the bank said in a release.

One day earlier, the Asian Development Bank (ADB) had also revised down its Vietnam GDP growth projection to 6.3% in 2025 and 6% in 2026, respectively.

Vietnam's GDP growth in H1 was 7.52%, a record high in 15 years, and it was 7.96% for Q2 this year, according to government data.