MANUFACTURING PRODUCTION RISES AT FASTEST PACE IN JUST OVER TWO YEARS

Growth in the Vietnamese manufacturing sector continued to strengthen midway through the third quarter of the year.

The S&P Global Vietnam Manufacturing Purchasing Managers' Index (PMI) posted 53.3 points in August, up from 52.9 points in July and above the 50.0 no-change mark for the fourteenth consecutive month.

The latest strengthening of business conditions in the sector, as revealed on September 3, was the most pronounced since February.

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Anecdotal evidence linked growth in August to a range of factors, including the development and release of new products, better material availability and softer price pressures. These contributed to marked increases in both new orders and manufacturing production during the month.

Output rose for the 16th consecutive month, and at a rapid pace that was the fastest in just over two years. Likewise, the pace of expansion in new orders also quickened and was the sharpest since last October

The increase in overall new business seen in August was recorded in spite of a renewed fall in new export orders amid ongoing geopolitical instability. The drop in new business from abroad was the first in four months, but only marginal.

Manufacturers also recorded a renewed reduction in employment, the fifth time in the past six months in which staffing levels have fallen. Panellists reported resignations and retirements, as well as the scaling back of the use of temporary labour.

Employment was reduced despite more signs of pressure on capacity as work backlogs rose for the second month running in line with a sharp increase in new orders.

Higher output requirements did encourage manufacturers to expand their purchasing activity again in August. The rate of growth was strong, but eased to a three-month low. Purchased items were often used to support production, and this meant that stocks of purchases continued to fall despite the expansion in input buying. The latest reduction in preproduction inventories was the least marked in five months, however.

Stocks of finished goods also fell in August as products were shipped to customers. The latest reduction was solid and the fastest since April.

Although suppliers' delivery times continued to lengthen, transportation issues were less pronounced midway through the third quarter, meaning that the latest lengthening of lead times was only marginal and the joint-weakest in two years of continuously worsening vendor performance (equal with April 2025).

Higher oil prices continued to feed through to increases in costs of derived products such as fuel, plastics and shipping. That said, the rate of input cost inflation eased to an 11-month low and was slightly weaker than the series average. Selling prices also increased at a slower pace, with the rate of inflation softening for the fourth consecutive month.

New products, improved capacity and stronger client demand supported confidence among manufacturers that output will increase further over the coming year. Confidence eased slightly from July, however, and was some way below that seen before the outbreak of war in the Middle East.

Andrew Harker, economics director at S&P Global Market Intelligence said, "The Vietnamese manufacturing sector began to motor midway through the third quarter of the year. As of August, growth in output and new orders has not only returned to the marked rates seen at the start of the year, but surpassed them. As price and supply pressures have receded, manufacturers have been able to secure new business and meet order requirements through higher production volumes."

"This growth has been achieved despite a muted picture for employment, with workforce numbers scaled back in August amid relatively subdued business confidence due to ongoing geopolitical uncertainty. This suggests that firms have been able to boost efficiency to ramp up production."

Source: VIR