On the morning of October 2, S&P Global announced the Vietnam manufacturing industry PMI report for September. In particular, there were 3 outstanding highlights: a slight decrease in output; New orders increased as exports surged and inflation pressures grew.

The report clearly shows that, after improving in August, the general business conditions of Vietnam's manufacturing industry decreased slightly in September.

The survey data also stated that demand and business confidence increased, but also pointed to excess production capacity leading to reduced output and employment. The inflation rate has increased as both input costs and output prices increased faster at the end of the third quarter of 2023.

Notably, the most positive signal of this survey period is that the number of new orders increased for the second consecutive month, and the growth rate was almost equal to the previous survey period. Especially from Asian economies, which helped increase the total number of new orders. The growth rate in the number of orders from abroad is stronger and more significant than in August.

Although demand continues to increase, manufacturers say the number of new orders received remains modest, causing output to decline. Output fell slightly after rising in August, and output has so far fallen in six of the past seven months. The decline in output was concentrated among producers of intermediate goods, while producers of consumer goods and capital goods recorded increases in output.

Backlogs continued to decline in September, suggesting that manufacturers still maintain enough capacity to handle existing workloads. In such conditions, manufacturers are still not interested in hiring more employees. Employment fell for the seventh consecutive month. Although only modest, the pace of employment decline was the most significant since June.

Growth plans are also reflected in data on business confidence, which increased for the fourth consecutive month, and this increase was the highest since February. Companies expected the number of new orders to increase, from which output will increase. About 45% of survey respondents predict output will increase in the next year, while only 7% are pessimistic.

Although input demand continued to increase in September, suppliers continued to accelerate deliveries. Delivery times have shortened for the ninth consecutive month, although the level is the lowest since April.

Commenting on the survey results, Mr. Andrew Harker, Economic Director at S&P Global Market Intelligence, said that the picture of Vietnam's manufacturing industry was contrasting in September. On the positive side, companies continued to increase demand, as the number of new orders increased at an encouraging level. This has increased confidence in output prospects in the coming year.

On the other hand, there is still excess production capacity in the industry, with companies continuing to reduce employment and slightly reduce output while choosing to use inventories accumulated in recent months to meet new orders.

Since then, the manufacturing industry seems to be at a turning point. If demand continues to increase, this increase will lead to growth in the industry.