This article analyzes Vietnam's July 2025 Manufacturing Purchasing Managers' Index (PMI) based on a report published by U.S. research firm S&P on August 1.
Significant PMI Improvement
Vietnam's July manufacturing PMI rose 3.5 points from the previous month's 48.9 to 52.4, surpassing the key 50 threshold for the first time in four months. This recovery confirms that Vietnamese manufacturing has shifted from a deteriorating phase to an improving phase. PMI fluctuates between 0 and 100, with readings above 50 indicating month-on-month improvement or increase, while below 50 represents deterioration or decrease.
Detailed Component Analysis
A closer examination of PMI components reveals a complex situation. Export-oriented new orders contracted for the ninth consecutive month due to overseas market disruption from U.S. tariff measures, with weak external demand continuing. Conversely, domestic demand recovery led to overall new orders increasing for the first time in four months, creating a structure where domestic demand compensates for declining external demand. Production increased for the third consecutive month following the expansion in new orders.
Employment Situation and Future Challenges
Employment continued to decline due to excess factory production capacity, but the pace was the most gradual in nine months, indicating stabilization in employment conditions. S&P Economics Director Andrew Harker analyzed: "Vietnam's manufacturing sector is recovering by compensating for U.S. tariff measure impacts in other business areas. However, raw material procurement difficulties are causing supplier delivery delays and cost increases, potentially constraining future growth."
U.S. Market Impact and Future Outlook
In the United States, Vietnam's largest export destination, signs of economic deceleration are emerging as tariff increases begin affecting the Consumer Price Index (CPI) through price pass-through. The U.S. Labor Department announced on August 12 that July CPI rose 2.7% year-on-year, below market expectations of 2.8%. However, the core index excluding volatile food and energy prices increased 3.1%, indicating continued inflationary pressure. While overall price surges have not yet materialized, attention to U.S. market trends is necessary as companies advance tariff price pass-through.
The article concludes that Vietnamese manufacturing shows signs of recovery through domestic demand recovery despite headwinds from U.S. tariff measures, but supply chain challenges and instability in major export destination markets may become growth constraint factors going forward.