Production of bags at the Ladoda Joint Stock Company. Vietnamese manufacturers registered further expansions in output and new orders in August. — VNA/VNS Photo Tuấn Anh

Vietnamese manufacturers registered further expansions in output and new orders in August, with the S&P Global Vietnam Manufacturing Purchasing Managers’ Index (PMI) at 52.4.

Despite a slight drop from 54.7 in July, PMI signaled a solid monthly improvement in business conditions. Rates of expansion remained strong and prompted the most marked increase in purchasing activity in more than two years.

“The improvement in the health of the sector reflected further rapid increases in output and new orders… Improvements in customer demand resulted in growth of new orders with firms raising production accordingly,” the report stated.

International demand is also improving with new export orders rising for a fifth consecutive month.

While some manufacturers reported higher raw material prices, the rate of inflation slowed amid signs of competitive pressures. Lower oil prices have also helped reduce transportation costs.

The report carried on to state: “Strong growth of new orders and softer cost pressures led manufacturers to increase purchasing activity sharply during August. Moreover, the rate of growth quickened for the fourth month running to the fastest since May 2022."

Manufacturers remained optimistic that output will increase over the coming year, based on expectations of further improvements in customer demand and new orders.

August saw a drop in employment for the first time in three months amid resignations and the ending of some temporary contracts, however. The report said that the drop in workforce numbers, at a time of rising new business, meant that backlogs of work continued to accumulate in August.

According to Andrew Harker, Economics Director at S&P Global Market Intelligence, 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,” he said.

"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." — VNS