Logo of Phnom Penh Post newspaper Phnom Penh Post - Vietnam’s manufacturing sector hit by Covid-19 wave

Vietnam’s manufacturing sector hit by Covid-19 wave

Content image - Phnom Penh Post
An auto component production line of Keihin Vietnam Co Ltd. The issues around the pandemic and price rises also impacted new orders in Vietnam at the end of the first quarter. VIETNAM NEWS AGENCY

Vietnam’s manufacturing sector hit by Covid-19 wave

The Vietnam Manufacturing Purchasing Managers’ Index (PMI) dropped to 51.7 in March from 54.3 in February, as the latest wave of the Covid-19 pandemic led to widespread labour shortages in the manufacturing sector during March, according to S&P Global.

In a report released last week, S&P Global said that although the situation still pointed to an overall strengthening of business conditions, the latest improvement was the least marked in the current six-month sequence of growth.

Central to the slowdown in the rate of improvement overall was the current wave of the Covid-19 pandemic in Vietnam. One of the main impacts on firms came in the form of widespread infections among workers, resulting in a first decline in employment in four months, according to the report.

Staff shortages meant that firms were unable to maintain production volumes, with output falling for the first time in six months. Inflationary pressures also contributed to the drop in production, which was nonetheless only modest as some firms expanded output in line with higher new orders.

Difficulties raising production due to labour shortages led to a further accumulation of backlogs of work, with the latest increase the most marked since September.

The report said the issues around the pandemic and price rises also impacted new orders at the end of the first quarter. That said, both total new business and new export orders increased for the sixth month running.

Efforts to keep up with order requirements were helped by the use of inventories given difficulties with production. As a result, stocks of finished goods decreased for the first time in three months.

The aforementioned inflationary pressures were highlighted by both of the survey’s price indices in March.

The rate of input cost inflation surged higher, reaching the fastest in close to 11 years. More than half of all respondents signalled that their input prices had risen over the month, with higher costs for oil and gas mentioned in particular. Rising shipping and raw material prices were also cited.

In turn, manufacturers raised their selling prices at an accelerated pace. The increase was the fastest since last November’s 10-and-a-half year high.

Although purchasing activity rose slightly in March, the rate of growth slowed sharply and was the weakest in the current six-month sequence of expansion. Stocks of purchases were also up modestly. With current production requirements falling, any inventory building largely reflected efforts to accumulate reserves.

A range of factors led to longer suppliers’ delivery times in March, including the effects of the Covid-19 pandemic such as labour shortages and restrictions at the border with China. The conflict in Ukraine also acted to delay deliveries, with lead times lengthening to the greatest extent since last October overall.

According to the report, the severity of the latest wave of the Covid-19 pandemic and worries about inflationary pressures acted to dampen expectations for the future. Business confidence dropped to the lowest in six months. However, firms remain optimistic that output will rise over the coming year, based on hopes that the pandemic will fade and new orders expand.

S&P Global economics director Andrew Harker said: “The surge in Covid-19 cases in Vietnam during March took its toll on the manufacturing sector, pushing output back into contraction territory.

“This was primarily due to labour shortages, as so many workers were off with infections that factories were unable to maintain production volumes.

“While firms will be hoping that infection levels start to ease soon, providing some alleviation on that front, the war in Ukraine provides a further headwind.

“The most noticeable impact for Vietnamese firms in March was on prices. Input costs increased at the sharpest pace in almost 11 years on the back of higher costs for oil and gas following the outbreak of war.

“This has dashed any hopes that inflationary pressures might be set to ease over the months ahead.”

VIET NAM NEWS/ASIA NEWS NETWORK

MOST VIEWED

  • Hong Kong firm done buying Coke Cambodia

    Swire Coca-Cola Ltd, a wholly-owned subsidiary of Hong Kong-listed Swire Pacific Ltd, on November 25 announced that it had completed the acquisition of The Coca-Cola Co’s bottling business in Cambodia, as part of its ambitions to expand into the Southeast Asian market. Swire Coca-Cola affirmed

  • Cambodia's Bokator now officially in World Heritage List

    UNESCO has officially inscribed Cambodia’s “Kun Lbokator”, commonly known as Bokator, on the World Heritage List, according to Minister of Culture and Fine Arts Phoeurng Sackona in her brief report to Prime Minister Hun Sen on the night of November 29. Her report, which was

  • NagaWorld union leader arrested at airport after Australia trip

    Chhim Sithar, head of the Labour Rights Supported Union of Khmer Employees at NagaWorld integrated casino resort, was arrested on November 26 at Phnom Penh International Airport and placed in pre-trial detention after returning from a 12-day trip to Australia. Phnom Penh Municipal Court Investigating Judge

  • Takeo hand-woven silk items provide local high-quality alternative to imports

    After graduating from university and beginning her career as a civil servant at the the Ministry of Economy and Finance, Khieu Sina found time to establish a business that aligns with her true passion – quality hand-woven Khmer goods. Her product line, known as Banteay Srei,

  • Sub-Decree approves $30M for mine clearance

    The Cambodian government established the ‘Mine-Free Cambodia 2025 Foundation’, and released an initial budget of $30 million. Based on the progress of the foundation in 2023, 2024 and 2025, more funds will be added from the national budget and other sources. In a sub-decree signed by Prime Minister Hun Sen

  • Two senior GDP officials defect to CPP

    Two senior officials of the Grassroots Democratic Party (GDP) have asked to join the Cambodian People’s Party (CPP), after apparently failing to forge a political alliance in the run-up to the 2023 general election. Yang Saing Koma, chairman of the GDP board, and Lek Sothear,