Production at Đà Nẵng Rubber Joint Stock Company (DRC). — VNA/VNS Photo

HÀ NỘI — The S&P Global Vietnam Manufacturing Purchasing Managers' Index (PMI) posted 48.9 in January, down from 49.8 in December and below the 50 no-change mark for the second successive month.

Under a report released on February 3 explaining the reasons behind this decline, S&P Global noted that the number of new orders recorded its first decrease in four months due to weakening customer demand.

The overall drop in new orders also reflected a continued decline in new export orders, which decreased for the third month running.

The situation contributed to a production decline, the first in four months. However, similar to new business, the drop in output was only slight.

Meanwhile, the downturn in new orders meant spare capacity in the Vietnamese manufacturing sector. Firms were therefore able to deplete backlogs of work for the first time in eight months.

Manufacturers kept cutting jobs for the fourth straight month, with layoffs at their highest since last May.

On the other hand, purchasing activity saw a slight increase in January, as surveyed businesses sought to secure sufficient input materials for production needs.

However, firms continued to face delays in securing materials, with suppliers' delivery times lengthening for the fifth month running. Slow transportation and higher shipping costs were behind longer delivery times, according to survey respondents.

The rate of input cost inflation slowed in January to its weakest point in the current 18-month sequence of rising input prices.

Firms linked rising input costs to higher prices for raw materials and transportation.

The slower rise in costs allowed manufacturers to lower selling prices in an attempt to revive weak customer demand. Consequently, output prices fell for the first time in nine months, though the decline was only marginal.

According to S&P Global, firms maintained an optimistic outlook for production over the coming year, with sentiment recovering from the 19-month low posted in December.

Over 36 per cent of survey respondents expected output to increase over the next 12 months, driven by hopes of a market demand recovery.

"Vietnamese manufacturers endured a disappointing start to 2025, with subdued demand conditions leading to renewed falls in new orders and output and a more pronounced scaling back of employment,” Economics Director at S&P Global Market Intelligence Andrew Harker said.

However, he noted that pricing pressures had eased, with slower cost inflation allowing firms to lower selling prices to boost demand.

"Manufacturers will be hoping that conditions begin to improve soon, and were at least more optimistic than was the case at the end of 2024,” he added.

S&P Global Market Intelligence forecasts growth of 4.6 per cent for industrial production in 2025. — VNS