Vietnam’s manufacturing industry continues to decline but the level has slowed down

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Manufacturers had to cut selling prices to attract new orders. Photo: N. H

On June 1, Nikkei announced Vietnam's Purchasing Managers' Index (PMI) increased 10 points in May, reaching 42.7 points compared to a record low of 32.7 of April. The disruption caused by the Covid-19 pandemic has led to asix-consecutive month decline in production output and it was a sharp decline. However, the decrease was slighter than in April assome companies resumed operations.

Asimilar trend was also shown in the number of new orders with the sharp decline but the level has slowed compared to the record level in April. Some survey respondents said the demand weakness for the new export orders and this index has fallenfaster than the total number of new orders.

The number of new orders continued to fall sharply, resulting in unused production capacity. Manufacturers are still cautious in recruiting and often did not immediately replace workers who left their jobs.

Manufacturers also continued they wouldreduce purchasing activities and cutthe volume of inventories of both purchased and finished goods, although the decrease was slower than in April. The supply chain disruption due to Covid-19 was still most prominent in the survey in May, with the seller's delivery time continuing to extend significantly. Survey team members said it was difficult to obtain imported goods.

The rarity of some materials has increased pressure on input costs in May. Input prices fell forthe second consecutive month, but it is only slight decrease. Those surveyed said that the decrease in input prices was mainly due to a decrease in oil price

To attract new orders, manufacturers reduced selling prices at a slower level but the price was still a significant level.

Commenting on the results of a recent survey, Andrew HarkerEconomics Director at IHS Markit said thatVietnam's success in controlling the Covid -19 pandemic has allowed the economy to restore. However, the PMI data shows the recovery will take a long time, while the manufacturing industry still declines in the middle of the second quarter of the year, although the decrease is slighter than the record level of April. A return to growth may be gradual with little support from overseas markets, at least in the near future, as the pandemic continues to affect many parts of the world.