Vietnam manufacturing PMI falls to 49.8 in Dec, below no-change mark

The growth in production and new orders slowed, prompting firms to reduce employment levels and cut back on inventories. Despite these challenges, purchasing activity saw a renewed increase. However, business confidence dipped sharply, reaching its lowest point in 19 months, S&P Global said in a press release.

Inflationary pressures picked up, with both input costs and output prices rising at the fastest rates since July. The worsening in the health of the sector was recorded despite increases in output and new orders, as firms scaled back their employment and stocks of purchases.

Although both output and new orders increased in December, rates of expansion were only slight and the weakest in the respective three-month growth sequences. Some firms signalled demand improvements, while others reported that market conditions had softened.

While total new business continued to rise, new export orders decreased for the second month running and at a solid pace. Concerns about global market instability and uncertainty caused a drop in confidence regarding the year-ahead outlook for production. Sentiment fell markedly in December and was the lowest since May 2023.

Expected rises in output in the coming months led to a renewed increase in purchasing activity, with the rate of expansion the fastest in four months. Firms remained reluctant to hold excess inventories, however, and reduced stocks of purchases accordingly. Stocks of finished goods were also down, said the release.

Manufacturers reduced employment for the third successive month at the end of the year amid muted growth of new orders. Although modest, the pace of job cuts was the sharpest since August. The continued scaling back of employment at a time when new orders were expanding (albeit slightly), meant that backlogs of work accumulated again in December, extending the current sequence of rising outstanding business to seven months. That said, the latest increase was only marginal and the weakest in this sequence.

Inflationary pressures picked up in December, with both input costs and output prices rising at sharper rates than in November. Material shortages and exchange rate fluctuations contributed to higher input costs, with oil and metals among the items mentioned as being up in price.

In turn, companies increased their output prices for the eighth month in a row, and at a solid pace that was the fastest since July. The latest rise was also stronger than the series average. Finally, suppliers' delivery times lengthened for the fourth month running, with firms often noting slow traffic conditions, added the release.

“It was a subdued end to the year for the Vietnamese manufacturing sector as growth of output and new orders slowed. Global market uncertainty also acted to depress confidence, which fell to the lowest in more than a year-and-a-half. This may in part reflect the uncertain picture with regards to plans by the incoming US administration around tariffs. Further announcements on this in the new year will help to provide clarity on any potential impacts on Vietnamese manufacturers,” said Andrew Harker, economics director at S&P Global Market Intelligence.

ALCHEMPro News Desk (SG)