The S&P Global Vietnam Manufacturing Purchasing Managers’ Index (PMI) dropped to 48.9 in June from 49.8 in May, staying below the 50 no-change mark for the third consecutive month and signalling a modest decline in business conditions at the end of the first half of the year.
Vietnam’s manufacturing sector faced worsening demand in June, with US tariffs driving a sharp fall in export orders, according to S&P Global.
The PMI slipped to 48.9, signalling a modest decline.
Firms cut jobs, purchasing, and inventories, despite a slight rise in output.
Business confidence improved, but outlook remains uncertain amidst ongoing trade volatility.
The manufacturing output increased slightly for the second month running, and business confidence improved. Input costs rose slightly after declining in May, leading to the first increase in selling prices in 2025, S&P Global said in a press release.
The third successive fall in new orders was central to the downturn. Although the decline in new business was modest, it accelerated compared to May. Export markets saw a particularly steep deterioration, with the drop in new export business matching the sharpest decline since September 2021, equalling the fall recorded in May 2023. Respondents cited US tariffs as a key reason behind the decline in export orders.
The fall in new orders prompted reductions in employment, purchasing activity, and inventories. Staffing levels fell for the ninth straight month and at a faster pace than in May. Firms were still able to reduce backlogs of work at a solid rate.
Purchasing activity declined slightly in June after a similar increase in May, marking the third decrease in four months. Stocks of purchases and finished goods declined more sharply, with rates of reduction the steepest in nine and five months, respectively.
Despite weak demand, manufacturers increased production volumes in June, though the pace was slower than in May. Input costs rose after a first decline in nearly two years during May. The increase in costs was attributed to material shortages and the dong’s depreciation against the US dollar. Material shortages also led to longer supplier delivery times, alongside poor weather and transport delays. Supplier performance worsened to the greatest extent since February, added the release.
The renewed rise in input costs led firms to increase output prices, ending a five-month period of decline. However, the rate of output price inflation was marginal. Business confidence improved for the second month following a 44-month low in April. Optimism was supported by hopes for more stable market conditions and easing trade tensions, although the overall sentiment remained below the series average.
“June saw a worsening of international demand conditions for Vietnamese manufacturers as the impact of tariffs intensified. The steep drop in exports contributed to a further reduction in total new orders and led firms to scale back employment and purchasing. One positive from the latest PMI survey was that firms continued to expand their output, but this is unlikely to continue for long without an improvement in the demand situation,” said Andrew Harker, economics director at S&P Global Market Intelligence. “The first half of 2025 has been characterised by volatility and uncertainty, particularly around trade conditions. Business confidence has recovered somewhat in recent months, but positive sentiment is largely based on hopes for a more stable picture going forward. Whether that will indeed be the case remains to be seen.”
Fibre2Fashion News Desk (SG)