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A gloomy outlook for Vietnam’s manufacturing industry

A gloomy outlook for Vietnam’s manufacturing industry

Friday 07, 07 2023
The latest PMI results showed that output and new orders continued to decline for the fourth consecutive month, which causes companies to reduce staffing and purchasing activities.

Weak market demand

The results of S&P Global's Purchasing Managers' Index (PMI) show that manufacturers in Vietnam continue to face difficulties, with weak market demand at the end of the second quarter.

Vietnam manufacturing PMI

Specifically, Vietnam's manufacturing PMI in June remained below 50 points for the fourth consecutive month, showing that the health of the manufacturing industry continued to decline. With a result of 46.2, a slight increase from the level of 45.3 in May, this index shows that business conditions continue to decrease sharply.

Weak demand was mentioned a lot in the latest survey, and deteriorating market conditions were the main reason for the drop in new orders.

The total number of new orders fell for the fourth consecutive month at a strong pace. In addition, the number of new export orders fell faster than the total number of new orders, as demand in the international market fell.

The weakness in demand has caused manufacturing output to continue to decline, while there is also some feedback that the power shortage caused by the recent heat wave in Vietnam has restrained growth.

PMI of Vietnam

Output fell across all consumer goods, intermediate goods and investment capital goods sectors, and the overall pace of decline remained strong.

The drop in new orders caused the backlog to continue to decline, while manufacturers responded to the drop in work by reducing employment and purchasing activity.

Employment fell for a fourth straight month, and the rate of decline was stronger than in May.

Difficulties for companies are reflected in a series of June survey indicators showing relatively low business confidence, although they have risen from a six-month low in May.

Output will increase next year

However, manufacturers remain optimistic that output will increase next year, in the hope that market demand and the ability to find new customers will recover.

Output will increase next year

Andrew Harker, chief economist at S&P Global Market Intelligence, commented: “The latest Vietnam manufacturing PMI painted a bleak picture of business conditions at the end of the second quarter of 2023, when the lack of demand is the main problem companies are facing.”

“We are also seeing output, new orders, employment and inventories continue to decline as a result. The lack of electricity in Vietnam due to the heat wave has created additional difficulties for companies.”

“Overall, the manufacturing sector needs to boost demand, and therefore global manufacturing developments will be closely watched for signs of recovery,” he stressed.

Source: theleader

Compiled by VietnamCredit

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