According to the Purchasing Managers’ Index (PMI) report released by S&P Global, the manufacturing PMI stood at 51.2 in March, down markedly from 54.3 in February. Although remaining above the 50-point threshold that signals improved business conditions, the latest reading represented the weakest expansion since September 2025.

A key feature of the survey period was the impact of the Middle East geopolitical tensions on costs. Soaring oil prices drove up fuel, transportation and logistics expenses, with nearly half of surveyed firms reporting higher input costs – the sharpest increase since April 2022.

Amid mounting cost pressures, manufacturers passed part of the burden on to customers. Output prices consequently rose at the fastest pace since the survey began in 2011.

Higher prices directly affected market demand. Total new orders continued to grow but only marginally, marking the lowest increase in six months. Some firms reported that customers accelerated purchases to avoid anticipated price hikes.

External demand weakened more clearly as new export orders declined again following a stable performance in February. Manufacturing output extended its expansion streak to an 11th consecutive month though growth slowed significantly to the weakest level since mid-2025. Facing cost pressures and softer demand prospects, firms reduced purchases of raw materials for the first time in eight months, leading to lower input inventories.

Employment in the sector also fell for the first time in six months, with some companies citing difficulties in replacing departing workers and others cutting temporary jobs.

Rising fuel costs disrupted transportation, forcing suppliers to sharply lengthen delivery times – the most severe delays recorded in four years.

Material shortages and workforce reductions caused backlogs of work to increase again after four months of decline. In some cases, firms drew on finished goods inventories to meet orders, decreasing post-production stock levels.

Business confidence dropped to a six-month low as manufacturers expressed concern over the prolonged impact of Middle East tensions on prices, demand and raw material supply. Nevertheless, many firms still expect underlying demand to remain stable, supporting future gains in orders and output.

Commenting on the survey, Andrew Harker, Economics Director at S&P Global Market Intelligence, said the March PMI data clearly reflect the initial effects of geopolitical tensions on Vietnam’s manufacturing sector.

He noted that reliance on oil imports from the Middle East leaves businesses vulnerable to cost and supply chain shocks. Rapid increases in input prices have quickly translated into higher selling prices, highlighting the immediacy and scale of the impact.

Although output and new orders remained in expansion territory, growth momentum weakened notably from the previous month, partly due to customers bringing forward purchases ahead of expected price rises. In the short term, prospects remain subdued unless the conflict eases and disruptions along key shipping routes, particularly the Strait of Hormuz, are settled./.