Manufacturing growth strengthened in July

The S&P Global Vietnam Manufacturing Purchasing Managers' Index (PMI) rose to 52.9 points in July, up from 51.8 points in June and signalling a solid monthly improvement in the health of the sector. Business conditions have now strengthened in 13 consecutive months, with the latest improvement the most pronounced since February.

Manufacturing production increased sharply in July, with the rate of expansion quickening to a five-month-high. Output has now risen continuously on a monthly basis since May 2025.

Firms often linked higher output to an increase in new orders. New business expanded for the third month running in July, and at a faster pace than in June. Total new sales were supported by a solid increase in new export orders, which rose at the sharpest rate since July 2024.

Anecdotal evidence indicated that the improving growth picture in the sector was in part reflective of an easing of inflationary pressures.

Although respondents continued to report rising prices for shipping, and there were some mentions of further increases in fuel and oil costs, a recent dip in the oil price meant that other firms were able to make savings. As a result, both input costs and output prices increased at the slowest pace since September 2025.

Supply-chain disruption also softened further in July, with suppliers' delivery times lengthening to the least marked extent since May 2025. Where lead times did increase, panellists linked this to shortages of goods and transportation.

Meanwhile, manufacturers ramped up their purchasing activity in July, with the rate of expansion the steepest in almost four-and-a-half years. According to respondents, the rise in input buying mainly reflected higher output requirements, although some firms purchased items for use in the future.

With inputs being utilised to support sharply rising production, stocks of inputs continued to fall markedly. Stocks of finished goods were also down as products were shipped to customers to help satisfy order requirements.

Manufacturers also responded to greater workloads by taking on extra staff, the first time this had been the case in five months. That said, the pace of job creation was insufficient to prevent a build-up of backlogs of work amid solid new order growth

Hopes that new orders will continue to rise and plans for expanded production capacity were among the factors supporting confidence in the 12-month outlook for output in July. Sentiment rose to a five-month-high, but was still some way below the level seen just before the outbreak of war in the Middle East, as some panellists highlighted the potential for geopolitical issues to limit growth.

Andrew Harker, economics director at S&P Global Market Intelligence, said, "The second half of 2026 got off to a strong start as July PMI data pointed to improving growth momentum across the Vietnamese manufacturing sector. Softening inflationary pressures and an improving demand environment meant that firms were increasingly able to secure new work, including from abroad, where growth had remained muted up until July."

"Manufacturers were confident enough in the future to begin hiring staff again, as well as ramping up production and purchasing. Business sentiment remained below the level seen prior to the outbreak of war in the Middle East, however, and the fortunes of the sector for the remainder of the year will likely remain closely tied to geopolitical events," he said.

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