Vietnam’s manufacturing sector showed signs of recovery in May, following a sharp downturn in April attributed to US tariff policies.

While new orders continued to decline, output rebounded and overall business conditions steadied, with some firms citing a more stable tariff environment.

According to S&P Global, Vietnam’s Manufacturing Purchasing Managers’ Index (PMI) rose to 49.8 in May from 45.6 in April, remaining just below the 50-point threshold. The reading signals a near-return to stable operating conditions.

Survey data showed that new orders, particularly from overseas, fell again in May amid softer market demand and ongoing tariff-related challenges. The drop in export orders was notably sharper than the overall decline in new business.

In contrast, production rose after shrinking in April, supported by improved operating capacity and a steadier outlook on tariffs.

Business sentiment also strengthened slightly, although it remained below the historical average, with some firms still cautious about potential future tariff shifts.

Efforts to boost output led to a modest increase in input buying, ending a two-month decline. However, both input and finished goods inventories fell, as firms limited stockpiling and prioritised quicker deliveries.

Weaker demand prompted some suppliers to reduce their prices, leading to the first drop in input costs since July 2023. Manufacturers continued to lower selling prices for the fifth straight month, with output charges easing slightly in May.

Andrew Harker, Economics Director at S&P Global Market Intelligence, said the news around tariffs continues to play a key part in determining trends in the Vietnamese manufacturing sector.

“May saw a more stable picture in terms of US tariff policies than April, helping lead to a renewed expansion in output and improved business confidence. That said, manufacturers remained wary of the impact of tariffs and again saw a marked reduction in new export orders which contributed to a continued decline in new business overall,” he added.

Another noteworthy aspect of the latest PMI survey was a first fall in input costs for almost two years as suppliers offered discounts in a subdued demand environment, he said: "As we approach the mid-point of the year, eyes will remain on US tariff policy to see how the Vietnamese manufacturing sector will be affected."/.VNA