Vietnam’s manufacturing sector recorded a sharp rise in input cost inflation in March, driven by the impact of the war in the Middle East, with firms passing on higher costs to customers at the fastest rate in almost 15 years, according to an S&P Global survey released on April 3.
The Vietnam manufacturing purchasing managers’ index (PMI) remained above the 50.0 threshold in March at 51.2, signalling a ninth consecutive month of improving business conditions. However, the figure fell from 54.3 in February, marking the weakest pace of expansion since last September.
S&P Global said a key feature of the survey was the inflationary pressure linked to the conflict in the Middle East. Rising oil prices pushed up costs for freight, fuel and transportation, leading nearly half of surveyed firms to report higher input costs. The rate of increase was the steepest since April 2022.
As input costs rose, manufacturers increased selling prices at one of the fastest rates since the survey began in 2011, with March recording the sharpest rise in output prices in just under 15 years.
Higher prices weighed on demand, with total new orders growing only modestly. Some firms reported that customers had brought forward purchases to avoid anticipated price rises. Growth in new business was the slowest since last September.
External demand weakened, with new export orders falling markedly after remaining stable in February.
Manufacturing output continued to expand for the eleventh consecutive month, but at a much slower pace, the weakest since June 2025.
Slower order growth and rising costs also dampened purchasing activity. Input buying declined sharply, ending an eight-month period of expansion, while stocks of purchases fell.
Suppliers’ delivery times lengthened significantly, the most pronounced deterioration in four years, as higher fuel costs disrupted transportation.
Manufacturers also reduced staffing levels for the first time in six months, citing difficulties in replacing departing workers and a decline in temporary labour.
With lower employment and ongoing supply challenges, backlogs of work increased slightly in March, the first rise in four months. Some firms drew on finished goods inventories to meet demand, resulting in a notable decline in post-production stocks.
Business confidence fell to a six-month low, reflecting concerns over the impact of the Middle East conflict on global demand, input prices and supply chains.
Despite this, firms remained cautiously optimistic, with expectations that underlying demand would support growth in output over the coming year.
Andrew Harker, economics director at S&P Global Market Intelligence, said the data highlighted the immediate effects of the conflict on Vietnamese manufacturers.
“Given the country’s reliance on oil imported from the affected region, the impact on prices and supply chains would have been expected to some extent,” he said.
“The rate at which input cost inflation accelerated, and the subsequent increase in selling prices, which was the fastest in almost 15 years, shows the immediate and marked effects that firms are experiencing.
“Output and new orders remained in expansion territory in March, but rates of increase were well down on February, and some of the growth seen was due to customers placing orders in advance to avoid price rises.
“The near-term outlook therefore appears bleak, unless a swift resolution to the war and disruption through the Strait of Hormuz can be achieved.”
