Vietnam production growth remains elevated in August: S&P Global

Continued marked increases in output and new orders

The improvement recorded in the health of the sector reflects further rapid increases in output and new orders, with respective rates of expansion remaining sharp despite easing from the particularly elevated rates seen in June and July.

Improvements seen in customer demand resulted in growth of new orders, with firms raising production accordingly. In some cases, the relative stability of prices helped firms to secure new business, while there were also mentions of improving international demand, and new export orders rose for the fifth month running.

Inflationary pressures soften

Although both input costs and output prices continued to rise in August, reports of competitive pressures meant that the respective rates of inflation eased markedly during the month.

While both continued to increase, the inflation rate slowed markedly from July to reach the weakest figure in four months.

Some manufacturers reported higher raw material prices, although the inflation rate slowed amid signs of competitive pressures. Meanwhile, lower oil prices contributed to a fall in transportation costs in some cases.

Strong growth of new orders and softer cost pressures led manufacturers to sharply increase purchasing activities during August. Moreover, the rate of growth quickened for the fourth month running to the fastest since May, 2022.

Employment down for first time in three months

In contrast to the picture regarding purchasing activities, manufacturers recorded a drop in employment for the first time in three months amid resignations and the ending of some temporary contracts.

The drop in workforce numbers amid rising new business meant that backlogs of work continued to accumulate throughout August. Outstanding firms therefore increased for the third consecutive month, with the rate of expansion unchanged since July.

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

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,” he added.