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Covid-19’s impact on Vietnam’s manufacturing sector intensifies

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HCMC – Vietnam’s manufacturing sector saw an unprecedented downturn in April as a result of the Covid-19 pandemic, according to a survey by IHS Markit and Nikkei.

Record falls were seen in output, new orders, employment and purchasing amid company shutdowns and the cancellation of orders.

The Vietnam Manufacturing Purchasing Managers’ Index (PMI) fell sharply to 32.7 in April from 41.9 in March, which itself had signaled a record monthly deterioration in the health of the sector. Business conditions worsened in each of the past three months.

The impact of Covid-19 was most keenly felt with respect to production and new orders. Both fell severely during April amid order cancellations and company closures.

The decline in overall new business was outpaced by that seen for new export orders, reflecting the effects of the virus in markets all around the world.

Lower workloads led manufacturers to reduce staffing levels, while there were also some reports of employees having resigned.

Purchasing activity also decreased at a substantial pace. As a result, stocks of purchases declined sharply. Stocks of finished goods also fell, albeit to a lesser extent than in March.

Input prices decreased for the first time in 16 months during April and at a marked pace that was the fastest since September 2015.

With input costs falling, manufacturers continued to lower their output prices, extending the current sequence of decline to three months.

Firms were pessimistic on the outlook for production over the coming year. Sentiment dropped amid fears that the impact of the Covid-19 pandemic could last for a prolonged period.

“Whether April proves to be the nadir of the downturn will depend on how firms and their customers respond to an easing of the lockdown and reopening of businesses that have been closed temporarily,” said Andrew Harker, economics director at IHS Markit.

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