Production at a Honda Vietnam plant in Ninh Bình Province. Manufacturing output increased at the quickest pace since February, while new orders rose for a third straight month. — VNA/VNS Photo Nguyễn Chinh

HÀ NỘI — Việt Nam's manufacturing sector expanded at its fastest pace in five months in July, supported by stronger domestic and export demand, while easing inflationary pressures encouraged firms to increase production, hiring and purchasing activity, S&P Global Vietnam said in a news release on August 3.

The S&P Global Vietnam Manufacturing Purchasing Managers' Index (PMI) rose to 52.9 in July from 51.8 in June, marking the 13th consecutive month that the index has remained above the 50-point threshold separating expansion from contraction.

According to the report, manufacturing output increased at the quickest pace since February, while new orders rose for a third straight month. Export orders recorded their strongest growth since July 2024, reflecting improved overseas demand.

The survey also showed manufacturers increased employment for the first time in five months as workloads expanded. However, the pace of job creation was insufficient to prevent a build-up of work backlogs amid solid new order growth.

Companies also stepped up purchasing activity at the fastest rate in almost four and a half years to support higher production and prepare for future demand. Despite increased input buying, inventories of both raw materials and finished goods declined as firms drew down stocks to meet customer orders.

Cost pressures continued to ease in July. Although some firms reported higher shipping, fuel and oil costs, lower global oil prices helped reduce overall input cost inflation. Both input costs and output prices rose at their slowest pace in 10 months.

Supply chain disruption also softened further in July, with suppliers' delivery times lengthening to the least marked extent since May 2025. The increase in lead time is attributed to shortages of goods and transportation.

"The second half of 2026 got off to a strong start as July PMI data pointed to improving growth momentum across the Vietnamese manufacturing sector,” said Andrew Harker, economics director at S&P Global Market Intelligence.

“Softening inflationary pressures and an improving demand environment meant that firms were increasingly able to secure new work, including from abroad, where growth had remained muted up until July."

He said manufacturers had become confident enough to resume hiring while increasing production and purchasing, although business confidence remained below levels seen before the outbreak of conflict in the Middle East.

The report noted that manufacturers' confidence about output over the coming 12 months rose to a five-month high, supported by expectations of stronger new orders and plans to expand production capacity. Some firms, however, said geopolitical uncertainties could weigh on growth during the remainder of the year.

The PMI survey, compiled by S&P Global, was based on responses from about 400 manufacturers collected between July 9 and July 23. —VNS