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Vietnam's manufacturing activity downturn deepened in May

1 Jun 2023

HANOI, June 1 (Xinhua) -- The decline in Vietnam's manufacturing activity in May was sharper than the previous month, due to a deepening slump in new orders that darkens outlook for the export-driven economy, according to a report released by S&P Global Market Intelligence on Thursday.

The S&P Global Vietnam Manufacturing Purchasing Managers' Index (PMI) fell to 45.3 in May from last month's reading at 46.7, well below the 50.0 threshold that separates expansion from contraction in manufacturing activity. It marked a third straight month of declines and the fastest pace since September 2021, the report found.

The fall was driven mainly by the steepest decline in new orders in 20 months. Companies were reported to find it difficult to secure export orders as new business from overseas markets shrank for the third month in a row, said the report.

"The steepening decline in new orders during May is a cause for concern as it suggests that the Vietnamese manufacturing sector may be in for a lengthy downturn rather than a transitory soft patch," said Andrew Harker, Economics Director at S&P Global Market Intelligence, which compiles the report.

The decline in new orders led to reduced factory output midway through the second quarter of the year. Production fell for the third straight month, and at the fastest pace since January, data showed.

In response to lower output, firms scaled back both employment and input purchasing activity, Harker added.

Input costs decreased for the first time in three years as a result of a slight easing in inflationary pressures and waning demand, the report revealed.

The PMI index measures the activity level of purchasing managers in the manufacturing sector. A reading above 50 indicates expansion on a monthly basis in the sector, a reading below implies contraction.

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