HCMC – The Covid-19 pandemic has seen the Vietnamese manufacturing sector deteriorate in August and output and new orders drop for the second month in a row, with the latest report by IHS Markit revealing that the Vietnam Manufacturing Purchasing Managers' Index fell to 45.7 in August from 47.6 in July.

This represented an additional deterioration in the health of the manufacturing sector, after a return to growth had been signaled in June. However, the decline was less severe than that seen during the worst of the Covid-19-related downturn in April.

The latest reduction in manufacturing output was the eighth in the past nine months. New orders dropped sharply due to weak customer demand, leading to a further reduction in the backlogs of work and employment.

Input prices increased for the third month running, but at a slight pace. A scarcity of materials due to the Covid-19 pandemic was the principal cause of the rise in input costs. Similarly, the impact of the pandemic was one of the causes of the delayed delivery times among suppliers.

Manufacturers responded to the weak demand by lowering their output prices again in the middle of the year’s third quarter. Selling prices have decreased in each of the past seven months, with the latest fall being the fastest since May.

However, firms still predicted that the output would rise in the coming year, linked to hopes that the pandemic would be brought under control. However, optimism was among the weakest since the survey series began in April 2012.

“The latest PMI data for Vietnam highlights the ongoing effects of Covid-19 on the manufacturing sector and the challenges faced in trying to overcome them. Customer demand remained weak, with firms scaling back production accordingly. The picture around employment was particularly worrying, with jobs lost at the second-fastest pace in nine-and-a-half years of data collection,” said Andrew Harker, economics director at IHS Markit.

“Firms will be hoping that the virus can be brought back under control so that the recovery that got underway in June can get back on track,” he added.