Manufacturing index falls below 50 points

The Vietnam Manufacturing Purchasing Managers' Index (PMI), released by S&P Global Market Intelligence, fell to 49.8 points in December 2024.

On the morning of January 2, 2025, S&P Global released the Vietnam Manufacturing Purchasing Managers' Index (PMI) report for December 2024. There were 3 notable points: Output and new orders increased more weakly; business confidence decreased significantly; employment continued to decrease.

Slight decline in the last month of the year

Accordingly, the Vietnam Manufacturing PMI reached 48.9 points in December, which is still below the 50-point threshold and shows that business conditions in the industry have deteriorated for the fourth consecutive month. However, the index has increased compared to 47.3 in November, indicating a slower rate of decline.

Manufacturing health was weak for most of 2023, with only slight improvements in February and August. The average PMI reading for the year was the lowest since the Covid-19 pandemic began in 2020.

The latest decline in operating conditions continued to reflect weak demand, with total new orders falling for the second month running in December. However, the rate of decline eased compared to November as new export orders remained broadly stable.

Recent price increases have discouraged customers and contributed to a decline in new orders this period, according to survey respondents. In response to these signals, manufacturers have refrained from raising prices at the end of the year, raising them only the smallest in a five-month period of price increases.

The modest increase in selling prices was in stark contrast to the rise in input costs, which continued to rise markedly and at a pace little changed from the nine-month high recorded in November. According to respondents, the rise in input costs often reflected increases in electricity and oil prices, combined with a weak currency.

With new orders falling amid weak demand, manufacturers cut output further in December, extending the current decline to four months.

Employment continues to decline

Manufacturers shed jobs for a third straight month at the end of the year amid weak growth in new orders. Although modest, the pace of job losses was the sharpest since August.

Continued job losses at a time of rising new orders (albeit a modest one) led to a further rise in backlogs of work in December, extending the current run of backlog increases to seven months. However, the increase was only marginal and the weakest in the series.

Vietnam's manufacturing PMI in December 2024 fell below the 50-point threshold. Photo: TT

Inflationary pressures picked up in December, with both input costs and output prices rising at faster rates than in November.

Raw material shortages and exchange rate fluctuations contributed to higher input costs, with oil and metals among those recording price increases, according to survey panelists.

In return, companies raised output prices for the eighth consecutive month, and the rate of increase was the fastest since July. The increase was also stronger than the index's historical average.

Finally, supplier delivery times lengthened for the fourth consecutive month, with firms frequently citing slow traffic conditions. However, the lengthening of delivery times was only slight, and this was the least significant extension in the current series of declines in supplier performance.

Commenting on the survey results, Andrew Harker, Chief Economist at S&P Global Market Intelligence, said that this was a gloomy end to the year for Vietnam's manufacturing sector as output and new orders slowed. Uncertainties in the world market also reduced business confidence, causing the index to fall to its lowest level in more than a year and a half.

This partly reflects uncertainty around the incoming US administration’s plans for tariffs, with further announcements on the issue in the new year expected to shed light on any potential impact on Vietnamese manufacturers.

The Vietnam Manufacturing PMI is compiled by S&P Global PMI from responses to questionnaires sent to purchasing executives in a panel of approximately 400 manufacturers. The survey groups are segmented by sector and company size, based on their contribution to GDP.

Source: https://congthuong.vn/chi-so-nganh-san-xuat-xuong-duoi-nguong-50-diem-367506.html