Technicians at PV Oil perform maintenance at a refinery in the southern province of Ba Ria-Vung Tau. (Photo: VNA) They said output and the number of new orders have decreasedsharply with companies looking to cut jobs and reduce purchases.
The report said the Southeast Asian economy's Purchasing Managers'Index (PMI) was reported to have fallen to 45.3 in May from 46.7 in April. Itmarked the third consecutive month of decline and the largest drop sinceSeptember 2021.
S&P Global said global demand for goods and services hasremained weak, resulting in a significant drop in new orders. Revenue fromexport markets has also suffered for the third consecutive month.
Meanwhile, companies have taken measures to scale down productionsince the beginning of Q2, 2023, most notably in intermediate goodsmanufacturing. Weak demand has been hurting business confidence with Vietnam'sPMI at its lowest level since November last year.
However, it has given companies time to address some backlogorders from previous months.
Despite companies reducing their operational capacity, they wereable to tackle a significant portion of the backlog of work in May. The amountof unfinished work has decreased at the fastest pace since June 2021.
As production decreased, companies have been reducing bothpurchasing activities and inventory, marking the sharpest decline in inventorylevel in nearly two years.
Meanwhile, the operational efficiency of sellers has improved forthe fifth consecutive time.
Finished goods inventory has also decreased as companies adjusttheir production operations in line with the decline in new orders. This is thefirst decrease in three months. Meanwhile, demand for input goods continues todecline, relieving pressure on the supply chain.
The operational efficiency of sellers has improved for the fifthconsecutive year with the most significant improvement recorded since February2015. Decreased purchasing activities also relieved some pressure on the supplychain.
Weaker demand has forced suppliers to reduce prices to boostdemand while input costs have decreased for the first time in the last threeyears. Prices were reported to have gone down for a second consecutive month.
Andrew Harker, economics director at S&P Global MarketIntelligence, said the current decline in the number of new orders is a warningsign for the country's manufacturing sector and the sector will likely face anextended period of contraction rather than just a temporary downturn.
He said companies should be on the lookout for economic data forthe coming months as they will be crucial to determine if the market is goingto recover./.
VNA
