Vietnam's manufacturing sector faces decline in December 2023

However, there was a slight improvement, as the index increased from 47.3 in November, suggesting a milder rate of deterioration. Throughout most of 2023, the health of the sector experienced a downturn, with only February and August showing signs of improvement. The average PMI for the year was the lowest since the outbreak of the COVID-19 pandemic in 2020.

The latest decline in operating conditions again reflected a subdued demand environment, with total new orders down for the second month running in December. The pace of reduction eased from that seen in November, however, as new export orders neared stabilisation, as per S&P Global.

Anecdotal evidence suggested that recent price rises had deterred customers and contributed to the latest reduction in new orders. Responding to these signs, manufacturers limited the extent to which they raised their selling prices at the end of the year, hiking charges only fractionally and to the least extent in the current five-month sequence of inflation.

The marginal nature of the rise in selling prices contrasted with that seen for input costs, which continued to increase markedly and at a pace that was little changed from the nine-month high seen in November.

With new orders decreasing in a challenging demand environment, manufacturers cut their production volumes again in December, extending the current sequence of decline to four months.

Firms predicted that output will expand over the course of 2024, thanks to hopes for a recovery in demand both domestically and in export markets, plus business expansion plans. Sentiment hit a three-month high but was still below the series average.

Hopes for growth of output in 2024 meant that firms kept their employment and purchasing activity broadly stable in December despite falls in new orders. In both cases, the broad stability at the end of the year represented an improvement from modest reductions in November. Stocks of inputs were scaled back for the fourth month running, however.

A lack of demand for inputs and competition among suppliers meant that lead times on the delivery of purchased items continued to shorten. That said, the latest improvement was only marginal.

Stocks of finished goods were unchanged in December, after having fallen in three consecutive months to November. Some firms saw stocks of unsold products increase due to falling new orders, but others scaled back production accordingly to prevent a build-up of inventories. Meanwhile, backlogs of work increased for the first time in a year, and to the greatest extent since May 2022.

ALCHEMPro News Desk (DP)