Vietnam’s Purchasing Managers’ Index (PMI) fell to a five-month low of 47.3 in November from 49.6 in October, S&P Global reported on December 1.

The index signaled a solid monthly deterioration of business conditions in the sector, extending the current sequence of decline to three months.

Manufacturers faced renewed reductions in new orders in November, ending a three-month sequence of growth. The pace of decline was solid and the most marked since May. Weaker customer demand was reportedly behind the fall in new business. Waning demand extended to international customers as new export business decreased for the first time in four months. Some panelists reported that clients had been reluctant to pay increased prices for products.

With new orders falling and economic conditions challenging, firms scaled back production again. Output has now decreased in each of the past three months. Moreover, the rate of contraction accelerated sharply and was the most pronounced since May.

Cost pressures picked up again midway through the final quarter of the year, with the inflation rate hitting a nine-month high. Currency weakness reportedly led to higher prices for imported items, while fuel, oil, and sugar were among the specific inputs increasing in cost over the month. In turn, firms raised their own selling prices for the fourth successive month.

Falling new orders, reduced production requirements, and a further drop in work backlog meant that manufacturers looked to scale back their purchasing activity and employment in November.

Staffing levels decreased modestly following a fractional improvement in October, with numbers having now been reduced in eight of the past nine months. Meanwhile, a slight fall in purchasing activity ended a three-month period during which input buying had been growing solidly.

Firms also expressed a reluctance to hold inventories amid demand weakness. As a result, stocks of both purchases and finished goods were reduced, in each case for the third month running. Pre-production inventories decreased solidly, and to the greatest extent since June. Meanwhile, post-production stocks fell only fractionally.

Lower demand for inputs and sufficient stock holdings meant that suppliers to the sector continued to speed up their deliveries, extending the current sequence of improvement to eleven months. That said, lead times shortened only marginally and to the least extent in this period. Some respondents suggested that their suppliers scaled back operations, thereby leading to a softer improvement in vendor performance.

Although firms expect output to rise over the coming year amid hopes for an improvement in new orders, business confidence dipped for the second consecutive month and was below the series average. Firms expressed concern about the fragility of economic conditions and weakness in international demand.