The closing month of 2022 saw Vietnam’s manufacturing sector move deeper into contraction amid deteriorating demand both domestically and overseas, according to the latest report on the Vietnam Manufacturing Purchasing Managers’ Index (PMI) from S&P Global.

Enterprises have scaled back their employment and purchasing activity, while business confidence remained muted.

There were some signs of inflationary pressures returning, but the latest rise in input prices remained well below those seen earlier in the year, enabling firms to lower charges to customers as part of efforts to secure greater volumes of new business orders.

The PMI fell to 46.4 in December from 47.4 in November, posting below the 50.0 no-change mark for the second month running and thereby signaling a further deterioration in business conditions in the manufacturing sector.

The latest decline was the most marked since the pandemic-related downturn seen in the third quarter of 2021.

New orders were down solidly in December, falling for the second month running and to a greater extent than in November. Generally weak demand conditions were highlighted, with a number of key export markets mentioned as sources of weakness, including China, the EU, and US.

Manufacturers responded to lower new orders by scaling back production, reducing their staffing levels, and cutting input purchases.

Some panelists were concerned that challenging market conditions would persist into 2023, while a number of respondents expressed optimism that demand would recover and lead to growth in new orders and output.

The Vietnam Manufacturing PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP.

Indices range between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease.