Manufacturing sector struggles on weak demand in February

Vietnam’s manufacturing sector remained sluggish in February as weak demand led to declines in new orders and production, according to a survey released on Monday.

The S&P Global Vietnam Manufacturing Purchasing Managers’ Index (PMI) edged up slightly to 49.2 in February from 48.9 in January but remained below the 50.0 neutral threshold for the third consecutive month, signaling continued contraction in business conditions.

New orders fell for the second straight month, with the steepest pace of decline since September. Both domestic and international demand remained weak, with new export business shrinking for the fourth month in a row.

Manufacturing output also declined due to sluggish order inflows. Some firms opted not to replace departing staff, leading to a fifth consecutive month of job cuts, though the rate of workforce reduction was slower than in January. Despite this, spare capacity persisted, with backlogs of work decreasing at the fastest rate in 16 months.

Purchasing activity saw a slight increase, reflecting some confidence in future production. Business sentiment improved for the second consecutive month, reaching its highest level since June 2024, as firms hoped for economic stability and a demand recovery.

Supply chain challenges persisted, with delivery times lengthening for the sixth straight month. February saw the most significant delays in five months, as transportation disruptions affected both availability and speed.

Higher freight and raw material costs drove input prices up again, though inflation eased to a 19-month low. In response to weak demand, manufacturers lowered selling prices for the second consecutive month.

Andrew Harker, economics director at S&P Global Market Intelligence, noted that the sector continued to struggle but pointed to growing optimism about future output.

“Manufacturers in Vietnam reported subdued demand conditions again in February,” Harker said. “Issues with transportation were a key headwind, with respondents citing problems with freight speed and availability, as well as higher costs. Firms will be hoping for improvements in supply conditions and demand as the year progresses.”

The Saigon Times - HCMC