Despite a relatively slow start to 2025, sentiment among manufacturers in Vietnam has been more optimistic this year, according to S&P Global.
The January Purchasing Managers' Index (PMI) report released by US data analytics firm S&P Global showed that manufacturing sentiment in Vietnam has recovered from a 19-month low recorded in December 2024.
Specifically, more than 36% of survey respondents predicted that production would increase in the next 12 months, hoping for better market demand. PMI Vietnam was surveyed by S&P Global with a group of about 400 manufacturers, divided by sector and company size of workforce.
“Manufacturers are hopeful that the situation will improve soon and are at least more optimistic than they were at the end of 2024,” said Andrew Harker, chief economist at S&P Global Market Intelligence, which forecasts Vietnam’s industrial output to grow 4.6% this year.
The short-term outlook remains weak. The January PMI came in at 48.9, down from 49.8 in December and below 50 for the second consecutive month. A reading below 50 reflects contraction in manufacturing.
New orders fell for the first time in four months last month, with respondents reporting a softening in demand. On the bright side, there was a slight improvement in raw material procurement. The rate of input cost inflation slowed to its weakest in 18 months of price increases.
"The price situation has eased somewhat as the pace of cost increases has slowed, allowing companies to cut prices to boost demand," said Andrew Harker.
The slow production output last month could be attributed to two main reasons. First, the Lunar New Year 2025 with 9 official holidays started on January 25 (ie 26th of Lunar New Year) and lasted until February 2 (5th of Lunar New Year). Since it is the Lunar New Year month, most production activities slow down in the second half of the month as businesses prepare for the New Year's Eve event.
At the same time, the slowdown in manufacturing activity in Vietnam follows a general trend in Asia, where supply chains are closely linked and dependent on consumption from both the West and China.
Last month, the Caixin/S&P Global Manufacturing PMI in China fell to 50.1 points, down from 50.5 points the previous month and the lowest in four months. In Japan, the PMI surveyed by Jibun Bank also fell to 48.7 points, lower than at the end of last year and remaining below the 50 threshold for seven consecutive months.
In addition to South Korea's PMI rising slightly as it passed the peak of political tensions, manufacturing in Taiwan and the Philippines also slowed. Talk to Reuters , Toru Nishihama, chief emerging markets economist at Dai-ichi Life Research Institute, explained that Asian companies are cautious about Mr. Trump's tariffs, while also forecasting a slow consumption outlook in China.
“Mr Trump’s tariffs could accelerate US inflation and sustain the strength of the US dollar. This would put downward pressure on emerging Asian currencies. As global trade shrinks, the benefits received by Asian manufacturers will also decrease,” he added.
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