INVESTORS INCREASINGLY OPTIMISTIC ABOUT MANUFACTURING SECTOR

Confidence in the manufacturing outlook for the year ahead hit an 18-month high, with manufacturers taking on extra staff at a faster rate.

According to an industry report released by S&P Global on April 1, manufacturers in Vietnam are increasingly confident that production will increase over the year ahead.

Optimism is the strongest it has been in a year-and-a-half. Firms expect the launch of new products to boost output, while also hoping that an improvement in market demand will help to support new order growth.

Manufacturers also stepped up their recruitment efforts in March, raising employment for the second month running and at the fastest pace since October 2022.

Rising staffing levels, and a drop in new orders, has helped firms to work through their outstanding business for the second consecutive month. Moreover, the rate of depletion was the fastest in five months.

The report also points out that the S&P Global Vietnam Manufacturing Purchasing Managers' Index dipped below the 50 point no change mark in March, posting 49.9 points after a reading of 50.4 points in February. The index therefore signalled an end to the two-month period of improving business conditions at the start of 2024, but pointed to broadly unchanged operating conditions overall.

There were signs of demand weakness in March, leading to a drop in new orders despite discounts being offered to help secure sales. New export orders were also down, and to the greatest extent since July 2023 amid competitive pressures and geopolitical issues.

With new orders down, firms also scaled back production at the end of the first quarter of the year, following growth in January and February. The drop in production was only marginal, however, and limited to intermediate goods firms as expansions were recorded at consumer and investment goods producers.

Andrew Harker, economics director at S&P Global Market Intelligence said, “Growth stalled in the Vietnamese manufacturing sector in March as subdued demand put the brakes on new orders and production. Demand weakness was also reflected in the PMI survey's price indices, as input cost inflation slowed and an outright reduction in selling prices was recorded."

"On a more positive note, firms are increasingly optimistic that the sector will move back into gear in the months ahead, and this confidence helped to drive accelerated job creation at the end of the first quarter."

Source: VIR