The index results not only showed that the health of the manufacturing sector improved for the third consecutive month, but also showed that business conditions had strengthened significantly, in particular, output and new orders rose sharply.

The June order book was second only to the record set in March 2011, according to the survey. Reports showed that demand improved as some customers returned to request additional orders during the month. New export orders rose at the fastest pace since February 2022. The rapid increase in new orders was matched by a rise in manufacturing output, which posted the strongest increase in output in more than 5.5 years.

New orders have put pressure on operating capacity, and in some cases companies have had to hire additional workers. But the hiring, companies say, is only temporary.

The report also showed that companies increased their purchasing activity at the fastest pace since June 2022. However, inventories of purchased goods continued to fall; inventories of finished goods fell as businesses sold stocks. Another positive sign was that post-production inventories fell the most in the past three years.

However, the pressure on businesses to increase input costs is also very large. The report shows that the rate of increase in input costs in June continued and this is the third consecutive month of increase and is now at a high level in the past 2 years. Specifically, transportation costs, oil prices and costs of imported goods increased. To compensate, manufacturers increased their selling prices at the highest rate in the past 2 years. Notably, the increase in selling prices has been recorded for 2 consecutive months.

Although the delivery process has been gradually shortened, according to S&P Global experts, the improvement in sellers' performance is only small as there are still difficulties in international shipping.

Vietnam’s manufacturing sector returned to activity mid-year, overcoming the relatively modest growth seen in recent months, thanks to a rapid increase in new orders, said Andrew Harker, chief economist at S&P Global Market Intelligence. The sharp increase in new orders exposed staff shortages at some companies and led to increased workloads.

Hiring more staff to ensure the progress of new orders, along with the increase in basic salary in July, will increase the cost burden for businesses, especially when increased transportation costs cause input prices to rise to a two-year high.

"Rising inflation could dampen demand in the future, but for now firms will still benefit from a rise in new orders in June," said Andrew Harker.