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Snapshot: Manufacturing in Vietnam, October 2023

Each month the-shiv provides a snapshot of the manufacturing sector in Vietnam covering the latest developments, key performance indicators, and government data.

Overview

Vietnam’s manufacturing industry continued to struggle in October compared to a year earlier. Lower demand in key export markets due to a number of global challenges continued to weigh on consumer spending in several developed economies and subsequently demand for Vietnam’s exports.

But where demand-side challenges are largely out of Vietnam’s control, Vietnam has continued to engage in supporting local manufacturing. In particular, the use of anti-dumping and countervailing duties to curtail the import of cheap goods. For example, in October, the Ministry of Industry and Trade launched an investigation into wind turbine towers imported from China.

Manufacturers paying minimum wage also received a break, with the National Wage Council announcing that any increase to the minimum wage would be pushed back beyond the start of 2024. That said, it should be noted that most manufacturing firms generally pay well above minimum wage which is about VND4.5 million or US$184 a month–In the third quarter of 2023, the General Office of Statistics reported an average wage in the sector of VND 7.8 million or US$317.

But low-cost labour no longer seems to be the main factor manufacturers are looking for when they decide where to invest. Columbia Sportswear, which has 190 contract suppliers in Vietnam, was featured in an article by the New York Times in which it discussed moving production not just out of China, but out of Asia more generally. Specifically, it identified Central America as a new manufacturing hub pointing out that increased labour costs were countered by shorter shipping times and subsequently lower shipping costs.

Furthermore, it was reported that industrial rents have increased substantially in northern Vietnam. In Bac Ninh, around 50 kilometers from Hanoi and a major manufacturing center in Vietnam’s north, this was by as much as 48 percent. Savills, however, said this was due to increased demand rather than a shortage of supply so it may be a positive indicator for the sector.

But the big issue that is presenting a very real challenge to Vietnam’s manufacturing industry, and that is sucking up a lot of public discussion and debate, is sustainable textile regulations in Europe and the United States. It was reported in October that up to 80 percent of garment and textile firms in Vietnam had been impacted by these regulations. There is a push to rejig garment-making operations to meet these requirements, however, challenges accessing capital are holding back firms from making the necessary investment which ties into the general downturn in external demand for garment and textile products.

That said, taking a broad overview, October was more of the same for Vietnam’s manufacturing sector with no huge changes or surprises. That said, there were still a decent number of foreign-invested projects announced, suggesting that over the medium to long term the sector shows little signs of slowing down. 

Key developments, Vietnam manufacturing, October 2023

There were a number of big developments in Vietnam’s manufacturing sector in October. Several big projects started operating and several other sizable projects were announced in both northern and southern Vietnam. These include:

Key performance indicators, Vietnam manufacturing, October 2023

Overall, Vietnam’s exports increased in October over November. They were, however, still 7 percent lower than they were at this time last year. 

Exports

Vietnam’s total exports, October 2023

OctVs. Sep2023Vs. 2022
Value (USD)Change %Value (USD)Change %
Total32,252,881,4485.1291,459,331,078-7
Foreign-invested firms23,371,177,2903.5212,415,983,517-8.1

Source: General Department of Customs

Vietnam’s top manufactured exports, October 2023

OctoberYear to date
DescriptionValue (USD)ValueValue (USD)Value
Telephones, mobile phones, and parts thereof5,205,318,5813.344,127,340,133-12.4
Computers, electrical products, spare parts and components thereof5,103,031,035-6.846,520,561,427-0.3
Machine, equipment, tools, and instruments4,472,379,0809.935,397,172,159-7.4
Textiles and garments2,566,164,239-0.127,670,836,876-12.9
Footwear1,743,508,91630.316,443,038,593-18.3
Total19,090,401,85136.6170,158,949,188-51.3
% of total exports59.1958.38

Source: General Department of Customs

S&P Global’s Purchasing Managers’ Index

S&P Global’s monthly survey found that in October Vietnam’s PMI was 49.6 down from 49.7 in September. S&P found that new orders were up but only slightly–not enough to increase production and instead firms drew down on existing inventory rather than stocking up on new supplies of raw materials.

Vietnam’s Industrial Production Index

Vietnam’s Industrial Production Index increased by 0.5 percent in the first ten months of this year compared to the first ten months of last year, according to the General Statistics Office.

Industrial Production Index, Vietnam’s top manufactured exports, October 2023

SectorChange
SEPOCTVs SepVs Oct 2022Vs Jan-Oct 2022
Manufacturing and processing industry165.4175.6106.2104.9100.5
Prefabricated metal products(except machinery and equipment)143.1150.9105.4120.7108.7
Repair of machinery and equipment80.584.7105.292.5105.5
Motor vehicles183.4192.7105.198.987.4
Chemicals and chemical products104.6109.7105109.5105.9
Uncategorized metal products104.4109.5104.9111.3101.3
Mining hard coal and lignite126.5132.6104.894.598.7
Mining and collecting hard coal126.5132.6104.894.598.7
Milk and dairy products130.6136.8104.8106.6102.3
Other common machines106.3110.9104.385.999.8
Plywood, veneer, and other thin boards113117.7104.2117.599.4
Industry overall152.3160.7105.5104.1100.5

Source: General Department of Statistics

Vietnam manufacturing outlook for November

With no big changes in terms of the global economic outlook, Vietnam’s manufacturing sector will likely continue its slow and steady progress in November. That said, with Christmas just around the corner in the Western hemisphere, data from this month combined with October should provide a clearer picture of exactly where Vietnam’s manufacturing sector is situated in terms of recovering from the challenges it has faced this year.

How the sector performs over the next month or so should also provide an insight into domestic consumption over the Lunar New Year period, in which retail sales generally spike. The holiday will fall in the second week of February in 2024.

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