The HSBC PMI posted 47.9 in August, up from 43.6 in July. Readings below 50.0 show deterioration, but the latest reading was consistent with only a modest rate of deterioration that was the weakest since May.

According to Trinh Nguyen, Asia Economist at HSBC, while the business conditions in Vietnam remain challenging, the slowdown of the rate of manufacturing deterioration suggests that economic activities will likely gradually recover in the fourth quarter.

Survey among 400 purchasing managers of manufacturing firms shows that new export orders also decreased during in August, albeit at a slower rate than for overall new work.

Companies generally attributed the decline in total new business to weak demand from both domestic and external markets, said the report.

Reduced input buying contributed to a continued drop in stocks of purchases in August. Meanwhile, companies reported that supplier capacity was little tested over the month, with vendor lead times shortening further. This in part reflected sufficient availability of inputs at suppliers due to softer demand, the report said.

It further showed that average input costs faced by Vietnamese goods producers rose in August, ending a two-month period of decline. Respondents to the latest survey commented on higher prices paid for a range of raw materials.

However, the rate of input price inflation was relatively modest. Despite the rise in costs, companies continued to lower their average tariffs. The latest decrease in factory gate charges was the fourth in as many months, but much slower than those seen in June and July. Companies that reduced their selling prices did so in part due to competitive pressures, the report said.