Vietnam's manufacturing sector shows slight improvement in May

New orders increased solidly again in May as a strengthening demand environment helped firms to secure new customers and bring in new business. The rate of expansion was slightly softer than that seen in April, however. Meanwhile, new export orders also increased, albeit to a lesser extent than total new business.

The expansion of total new business encouraged manufacturers to raise their production volumes for the second month in a row. Moreover, the rate of growth quickened to the fastest since September 2022, as per S&P Global.

Despite the increases in new orders and output, manufacturers recorded a second successive monthly fall in employment midway through the second quarter. Anecdotal evidence suggested that employee resignations and extended absences had been behind the drop in workforce numbers, which was solid and the most pronounced for almost a year.

Despite the drop in staffing levels, firms were able to keep on top of workloads in May and reduced outstanding business following a marginal increase in the previous survey period.

While employment continued to fall, another expansion of purchasing activity was registered in May as firms responded to rising output requirements. The increase was the second in as many months, and more marked than in April.

Where companies purchased inputs during the month, they were faced with a sharp increase in prices. In fact, the rate of inflation quickened markedly and was the fastest since June 2022. A number of respondents indicated that currency weakness had added to material prices, while there were some reports of higher oil and fuel costs. Around one-quarter of respondents signalled an increase in input costs, against 5 per cent that posted a decrease.

The sharp rise in input costs fed through to an increase in selling prices, the first in three months. The pace of charge inflation was the joint-steepest in 15 months, on a par with that seen in October 2023.

After having been unchanged in April, suppliers' delivery times lengthened marginally in May. Panellists linked delivery delays to goods shortages and difficulties caused by geopolitical issues.

Meanwhile, stocks of both purchases and finished goods continued to fall, with current sequences of depletion extended to nine and five months respectively.

Factory expansion plans, the launch of new products and the prospect of continued growth of new business all supported confidence in the year-ahead outlook for production. Sentiment was broadly unchanged from that seen in April, remaining below the series average to signal relatively muted optimism.

ALCHEMPro News Desk (DP)