Hanoi (VNA) - The Vietnam Manufacturing Purchasing Managers' Index(PMI) fell to 45.7 in August from 47.6 in July as the effects of COVID-19 ledto a deterioration of business conditions in the country’s manufacturingsector, the latest survey by IHS Markit released this week showed.

This represented a second successive deterioration in the health of themanufacturing sector after a return to growth had been signalled in June.Although marked, the latest decline in business conditions was much less severethan that seen during the worst of the COVID-19 related downturn in April.

According to the survey, respondents indicated that the effects of the COVID-19pandemic led to declines in both output and new orders. New business decreasedat a solid pace amid reports of weak customer demand. Data also pointed to asharp reduction in new export orders, and one that was faster than that seenfor total new business.

The latest reduction in manufacturing output was the eighth in the past ninemonths, and faster than that seen in July. All three broad sectors posteddrops, with the rate of contraction sharpest among intermediate goodsproducers.

“Declining new orders led to further reductions in both backlogs of work andemployment amid a lack of pressure on operating capacity. The rate of depletionin outstanding business was sharp, while firms scaled back their staffinglevels to an extent only exceeded during the worst of the recent downturn inApril,” the survey stated.

A faster reduction in purchasing activity was also recorded amid lower neworders and production requirements. That said, the fall in input buying wasstill much weaker than April's record. The scaling back of inventories alsocontinued, with stocks of both purchases and finished goods decreasing inAugust. Some respondents indicated that finished products had been dispatchedto customers as soon as they were ready to avoid a build-up of inventories.

Input prices increased for the third month running in August, albeit at only aslight pace that was slower than the series average. A scarcity of materialsdue to the COVID-19 pandemic was the principal cause of the rise in inputcosts, according to respondents. Similarly, the impact of the pandemic wascentral to another lengthening of suppliers' delivery times.

Manufacturers responded to weak demand conditions by lowering their outputprices again midway through the third quarter of the year. Selling prices havenow decreased in each of the past seven months, with the latest fall thefastest since May.

Concerns around the ongoing effects of COVID-19 on demand led to a drop inconfidence among manufacturers regarding the 12-month outlook for production.Firms still predicted, on balance, that output will rise over the coming year,linked to hopes that the pandemic will be brought under control. That said,optimism was among the weakest since the series began in April 2012.

“With the data moving in the wrong direction at present, the latest PMI datafor Vietnam highlight the ongoing effects of COVID-19 on the manufacturingsector and the challenges faced in trying to overcome them. Customer demandremained weak, with firms scaling back production accordingly. The picturearound employment was particularly worrying, with jobs lost at thesecond-fastest pace in nine-and-a-half years of data collection,” AndrewHarker, Economics Director at IHS Markit, said.

However, he noted: "Firms will be hoping that the virus can be broughtback under control so that the recovery that got underway in June can get backon track."/.