Vietnam's manufacturing growth continues despite slower pace in August

Manufacturers in Vietnam reported further expansion in output and new orders midway through the third quarter. Although the growth rates moderated slightly from the near-record levels observed in July, they remained strong overall. This persistent demand prompted a notable increase in purchasing activity, marking the sharpest growth since May 2022. The strong performance was partly driven by stable prices, which helped firms secure new business, as well as improving international demand. Notably, new export orders rose for the fifth consecutive month, S&P Global said in a press release.

Despite the positive momentum, inflation pressures showed signs of easing. Both input costs and output prices continued to rise in August, but the rates of inflation slowed significantly from July, reaching the weakest levels in four months. Some manufacturers attributed this to competitive pressures, which tempered price increases, while others noted that lower oil prices helped reduce transportation costs.

In a less positive development, the sector experienced its first reduction in employment in three months. Manufacturers reported a decline in workforce numbers, citing resignations and the conclusion of temporary contracts. This reduction in employment occurred even as new business increased, resulting in continued accumulation of backlogs of work for the third consecutive month.

Despite the mixed signals, manufacturers remained optimistic about future output, expecting further improvements in customer demand and new orders. However, business sentiment dropped for the second month in a row and reached its lowest level since January.

Andrew Harker, economics director at S&P Global Market Intelligence, said: “As expected, the Vietnamese manufacturing sector saw a slowdown in growth of output and new orders from the particularly elevated rates seen in June and July. Those increases were always going to be hard to sustain and rates of expansion remained marked, so there is little cause for concern on that front. One issue firms are facing is a drop in employment, which is making completing projects more difficult and adding to outstanding business. We will hopefully see a return to job creation in the coming months.

“The news was better in terms of inflation, with both input costs and output prices rising at much weaker rates in August. In fact, this was reportedly a factor contributing to sustained new order growth. Overall, the sector continues to enjoy a strong second half of the year so far, with plenty of work to get through in the months ahead.”

Fibre2Fashion News Desk (KD)