On January 2, 2024, S&P Global announced the Vietnam manufacturing industry purchasing managers index (PMI) report for December 2023. There are 3 outstanding points: Output prices increased slightly in five months; The number of new orders and output continued to decrease; employment is almost stable.

NEW ORDERS DECREASE DUE TO WEAK DEMAND
According to S&P Global PMI data, Vietnam's manufacturing industry ends 2023 in a state of decline. Weak demand continued to contribute to a drop in new orders for the second consecutive month, and output fell accordingly. Meanwhile, purchasing activity and employment remained basically unchanged.

There were some reports that recent price increases had discouraged customers, and companies responded by only slightly increasing selling prices in December even though input costs continued to rise significantly.

As a result, Vietnam's manufacturing industry PMI reached 48.9 points in December, which is still below the 50 point threshold and shows that business conditions in the industry declined for the fourth consecutive month. However, the index increased from 47.3 points in November, showing a slower rate of decline.

"The health of the manufacturing sector worsened through much of 2023, improving only in February and August. The average PMI reading across the year was the lowest since the COVID-19 pandemic outbreak
in 2020.", the report stated. 

This decline in operating conditions continued to reflect weak demand, with total new orders falling for the second consecutive month in December. However, the pace of decline slowed compared to November when the number of new export orders was almost stable.

With new orders falling amid weak demand, manufacturers continued to reduce output in December, extending the current reduction period to four months.

EXPECTATIONS FOR RECOVERY IN 2024
According to S&P Global survey results, companies forecast that output will increase in 2024 because of hopes that demand will recover in both domestic and foreign markets and thanks to business expansion plans. Business sentiment hit a three-month high but remained below the index average.

Hopes of rising output in 2024 led companies to maintain employment and purchasing activity mostly stable in December despite a decline in new orders. In both cases, the overall stabilization at the end of the year showed an improvement from the slight decline in November. However, input inventories fell for the fourth consecutive month.

Commenting on the survey results, Mr. Andrew Harker, Economic Director at S&P Global Market Intelligence, said that the last month of the year reflects the picture of Vietnam's manufacturing industry for most of 2023 with weak demand leading to reduced output. Faced with weak demand, companies had to limit price increases in December to attract new orders despite their input costs continuing to increase significantly.

“Attention now turns to the prospects for 2024, with firms still optimistic on balance that output will expand. This led to broad stability of employment and purchasing activity despite the reductions in new orders, as manufacturers attempt to maintain capacity in the hope of better days to come."  Andrew Harker commented.