HÀ NỘI — Việt Nam’s manufacturing sector saw a strong rebound in October as the S&P Global Vietnam Manufacturing Purchasing Managers’ Index (PMI) rose to 54.5, up sharply from 50.4 in September, signalling a solid improvement in sector health. Business conditions strengthened to the greatest degree since July 2024, according to the latest S&P Global survey.

All five components of the headline PMI contributed to the upward movement in October.

New orders increased for the second consecutive month, and at a much faster pace than in September. The rate of expansion was the quickest since July 2024, reflecting improved customer demand.

New export orders also contributed to overall growth, rising for the first time in a year, albeit modestly.

Manufacturers responded to higher new orders by ramping up production, which increased at the fastest pace since July 2024. Output has now risen in each of the past six months.

Alongside stronger production growth, firms were more optimistic about the 12-month outlook for output. Business sentiment reached a 16-month high amid confidence that new orders will continue to rise and plans to expand production capacity.

The rise in new orders and higher production requirements also drove employment growth in October, the first in just over a year. Manufacturers increased workforce numbers in response to emerging signs of pressure on operating capacity. Backlogs of work rose for the first time in ten months, at the fastest pace in over three and a half years. Some firms linked this accumulation to both higher orders and stormy weather conditions.

Adverse weather and flooding also contributed to longer supplier delivery times, with lead times lengthening to the greatest extent since July.

Higher new orders and greater production requirements encouraged firms to expand purchasing activity for the fourth consecutive month. This rise in purchasing led to an accumulation of stocks of purchases, the first in just over two years. Stocks of finished goods decreased as firms used inventories to meet orders, although the reduction was slight and the smallest since January 2024 due to increased production.

Input cost inflation accelerated sharply in October, reaching its highest level since July 2024. Around 27 per cent of respondents reported higher prices for raw materials and supply shortages. Output price inflation also quickened, hitting a 40-month high.

Andrew Harker, economics director at S&P Global Market Intelligence, said: "The Vietnamese manufacturing sector moved up a gear in October, seeing much stronger increases in output and new orders during the month. Positively, the strength of the expansions was sufficient to enable firms to take on extra staff and build inventories of inputs.

"Whether these growth rates can be sustained in the months ahead remains to be seen, but there is clearly some positive momentum in the sector at present.

"Inflationary pressures built again, however, and are now relatively elevated. For now, customers are happy to look through price increases and commit to new orders, but this may start to wane should rates of inflation pick up further.” — BIZHUB/VNS