Vietnam’s manufacturing purchasing managers’ index (PMI) increased to 52.4 in July, up from 48.9 in June, marking its first rise above the 50.0 threshold, which indicates expansion, after four months below that level, according to a survey published by S&P Global on Friday.

The index signalled a notable strengthening in the manufacturing sector’s overall health, with the most significant improvement in business conditions seen in nearly a year.

This positive shift in operating conditions was accompanied by a return to growth in new orders during July.

New business grew for the first time in four months, reaching its fastest pace since November of the previous year, driven by reports of stronger customer demand.

However, some respondents pointed out that US tariffs have negatively affected new order growth, with foreign new business continuing to decline due to these tariffs, marking nine consecutive months of contraction.

The rebound in new orders contributed to continued production growth in July. Output increased for the third consecutive month, with the rate of expansion reaching its strongest level in 11 months.

Higher production demands also led to a renewed rise in purchasing activity, which grew at the fastest pace since August of the previous year, The Star reports.

Meanwhile, the country’s employment levels moved closer to stabilising. While staffing numbers continued to fall due to excess capacity from a recent decrease in new orders, the latest decline was the slowest in nine months, supported by increased labour demand driven by rising output needs.

Furthermore, despite the renewed growth in input purchasing, inventories of raw materials continued to shrink as respondents faced difficulties sourcing supplies. However, the rate of inventory depletion was the slowest since December 2023.

Challenges in obtaining materials, especially imports, caused input costs to rise at the beginning of the second half of the year. Input prices increased for the second consecutive month, climbing at the fastest rate seen in 2025 so far.

While manufacturers stayed hopeful about output growth over the next 12 months, their optimism declined to a three-month low in July and remained significantly below the long-term average.