Vietnam’s manufacturing sector remained in expansion in March, but momentum slowed sharply as firms faced a surge in costs linked to the Middle East conflict, according to S&P Global data.
The country’s Purchasing Managers’ Index (PMI) fell to 51.2 in March from 54.3 in February, marking the weakest improvement in operating conditions since September, though still above the 50 threshold that signals growth.
A sharp rise in oil prices drove input cost inflation to its fastest pace since April 2022, with nearly half of surveyed firms reporting higher expenses for fuel, freight, and transportation.
Manufacturers passed these costs on to customers, pushing selling prices up at the fastest rate in almost 15 years.
The escalation reflects Vietnam’s exposure to global energy markets, particularly amid disruptions tied to the Middle East conflict and shipping routes such as the Strait of Hormuz.
Higher prices began to weigh on demand, with growth in new orders slowing to its weakest pace since September.
Some firms reported a temporary boost from customers bringing forward purchases to avoid further price increases, but underlying demand softened.
Export orders declined notably after being broadly stable in February, pointing to weakening external demand.
Production continued to rise for an eleventh consecutive month, but at a much slower rate.
Firms reduced purchasing activity for the first time in eight months, while employment fell for the first time in six months as manufacturers became more cautious.
Supplier delivery times lengthened to the greatest extent in four years, largely due to higher fuel costs and transport delays.
Business confidence dropped to a six-month low, reflecting concerns about sustained cost pressures, supply chain disruption, and weakening global demand.
According to Andrew Harker, Economics Director at S&P Global Market Intelligence, the near-term outlook remains uncertain, with recovery dependent on a resolution to geopolitical disruptions affecting energy prices and logistics.
Despite this, firms continue to expect output to increase over the coming year, supported by underlying demand resilience.