Vietnam’s PMI reached 48.9 points in December 2023, and the decline slowed down

According to Donghai

Investing.com – The S&P Global Vietnam Manufacturing Purchasing Managers’ Index (PMI) hit 48.9 points in December, still below the 50-point threshold, indicating poor economic conditions, with sales in the industry falling for the fourth consecutive month. However, the index rose from 47.3 in November, indicating that the pace of decline has slowed.

Data shows that Vietnam’s manufacturing industry will be in recession by the end of 2023. Weak demand continued, causing new orders to fall for a second straight month and output to fall accordingly. Meanwhile, purchasing activity and employment remained largely unchanged. There are reports that recent price increases have put off customers, with companies only increasing selling prices slightly in December despite continued sharp increases in input costs.

Manufacturing health has been weak for much of 2023, with only slight improvements in February and August. The full-year average PMI result was the lowest since the onset of the COVID-19 pandemic in 2020. The contraction in operating conditions continued to reflect weak demand, with total new orders falling for the second consecutive month in December, but the decline slowed from November when the number of new export orders was basically stable.

The modest increase in sales prices was completely separate from the increase in input costs, and the index continued to rise sharply and was little changed from the nine-month high recorded in November. Rising input costs tend to reflect higher electricity and oil prices, coupled with currency weakness, according to survey respondents.

As demand weakened and new orders fell, manufacturers continued to cut production in December, extending the current cuts to four months. The company expects production to increase in 2024 due to recovering demand in domestic and foreign markets and business expansion plans.

Business confidence hit a three-month high but remained below the index average. Hopes for output growth in 2024 kept business employment and purchasing activity largely steady in December despite a fall in new orders. In both cases, overall stability at the end of the year improved from a small decline in November, but input stocks fell for the fourth consecutive month. Lack of demand for inputs and competition among suppliers have led to shrinking delivery times. However, improvements during this period were minimal.

Inventories of finished goods remained flat in December after falling for the third consecutive time in November. Some companies increased unsold inventories due to a decline in new orders, but others reduced production accordingly to avoid an increase in inventories. At the same time, the backlog increased for the first time in a year, the strongest increase since May 2022.

Mr. Andrew Harker, economics director at S&P Global Market Intelligence, said: “The last month of the year reflects the situation in Vietnam’s manufacturing industry where weak demand for most of 2023 has led to reduced output.” Faced with weak demand, companies had to reduce production in December. Limit price increases to attract new orders. This is despite their input costs continuing to increase significantly. Attention is now focused on the outlook for 2024 as companies remain optimistic that production will increase. This has led to stabilization in employment and purchasing activity as manufacturers try to maintain production capacity in hopes that brighter days are around the corner, despite a decline in new orders. ”