Viet Nam's manufacturing industry is vibrant again

S&P Global has released the Viet Nam Manufacturing Purchasing Managers' Index (PMI) report for June 2024, which highlights three major findings in the local economy.

Specifically, the number of orders increased the strongest since March 2011, employment grew again and output prices increased at the fastest rate in two years.

Growth in Viet Nam's manufacturing industry accelerated sharply at the end of the second quarter of 2024. The number of new orders increased at one of the fastest paces on record.

As a result, companies were able to increase production and purchasing activity, and increase employee numbers for the first time in three months.

The growth rate of input costs is also faster, reaching a two-year high as transportation costs and especially oil prices increase. To compensate, companies increased sales prices at the fastest pace since June 2022.

The index results not only show that the health of the manufacturing sector improved for the third consecutive month, but also demonstrate that business conditions have strengthened significantly.

In fact, the improvement in operating conditions is one of the two strongest since November 2018, equivalent to the levels recorded in April 2021 and May 2022. The stronger improvement in business conditions mainly reflects the increase in both output and new orders at mid-year.

In particular, the number of new orders has increased. Reports suggest demand has improved as some customers returned asking for more orders during the month.

In some cases, competitive pricing has helped companies secure new orders. The number of new orders increased rapidly in proportion to the increase in production output.

The sharp increase in new orders has put pressure on operating capacity, leading to a second increase in backlog in three months. Although only mild, the increase was the strongest since January.

Commenting on the survey results, Chief Economist at S&P Global Market Intelligence, Andrew Harker, said Viet Nam's manufacturing sector returned to growth since mid-year, overcoming relatively modest growth in recent months thanks to a rapid increase in new orders.

The sharp increase in new orders has exposed staff shortages in some companies. Faced with that situation, companies have recruited more employees.

Along with strong growth comes the cost burden, especially when rising transportation costs cause input prices to rise to a two-year high. Rising inflation could dampen demand in the future, but for now companies still enjoy a boost in new orders in June./.