Vietnam’s manufacturing moves deeper into contraction amid lower demand in December 2022

Vietnam’s manufacturing sector experienced a sharper reduction in output and new orders both domestically and abroad at the end of 2022.

This is according to a report released on Tuesday by S&P Global Market Intelligence.

The S&P Global Vietnam Manufacturing Purchasing Managers’ Index (PMI) dropped to 46.4 in December from 47.4 in November, posting below the 50.0 no-change mark for the second month running.

According to the report, the latest decline is the most marked since the pandemic-related downturn seen in the third quarter of 2021.

New orders were down “solidly’’ in December, falling for the second consecutive month and more sharply than in November.

Generally, weak demand conditions were highlighted, with several key export markets mentioned as sources of weakness.

Manufacturers responded to lower new orders by scaling back production, also for the second month, it said.

Andrew Harker, economics director at S&P Global Market Intelligence, said securing new work was likely to remain difficult until there is a pick-up in key export markets.

Also, several firms indicated that they expected demand to remain subdued in the near term at least.

“Manufacturers have responded quickly to the downturn in new orders, with the latest PMI data showing sharper reductions in output, employment and purchasing activity, as well as price cuts to stimulate demand,’’ he said.

After haven dropped to a 14-month low in November 2022, confidence in the year-ahead outlook for production remained relatively muted in December despite the slight improvement, the report said.

Some panellists were concerned that challenging market conditions would persist during 2023.

On the other hand, several respondents expressed optimism that demand would recover, leading to the growth of new orders and output, it added.