Vietnam's factory activity steps back in July amid COVID-19 impacts

August 4, 2020

Vietnam's Purchasing Managers' Index (PMI), which measures the economic health of the country's manufacturing sector, dipped back below the 50.0 no-change mark in July, posting 47.6 from 51.1 in June, a report compiled by the London-based global information provider IHS Markit revealed on Monday.

The Vietnamese manufacturing sector saw declines in output and new orders as the COVID-19 pandemic continued to impact business conditions. Employment decreased again while purchasing activity was reduced, said the report.

July data pointed to a modest reduction in manufacturing output, after a return to growth had been registered in the previous month. Respondents indicated that the COVID-19 pandemic continued to impact operations, with new orders reportedly lower.

In line with the picture for output, new orders fell following a rise in June. Total new order was undermined by a sharp contraction in new export orders, linked to restrictions on travel and falling demand in export markets due to COVID-19.

Despite a drop of output in July, firms remained confident in the 12-month outlook for production. Sentiment was down only slightly from that seen in the previous month. According to respondents, expected improvements in market demand and new orders were behind the positive outlook for output, read the report.

"The data highlight the impact that the COVID-19 epidemic continues to have on the economy, with new export orders particularly hard to come by given travel restrictions and continuing outbreaks in a number of export markets," Andrew Harker, economics director at IHS Markit commented on the survey results.

A PMI reading above 50 indicates an expansion of the manufacturing sector compared to the previous month; below 50 represents a contraction; while 50 indicates no change.