Following the recovery momentum since late 2023, industrial production continues to show a positive trend. Output has increased significantly due to the fourth consecutive month of improved new orders.
According to S&P Global, the growth rate of manufacturing output in July was faster than in June and reached its highest level since March 2011. Therefore, industrial production maintained a positive growth momentum, with the estimated industrial production index in July increasing by 0.7% compared to the previous month and up to 11.2% compared to the same period last year.
Specifically, compared to the same period last year, the processing and manufacturing industry increased by 13.3%; electricity generation and distribution industry increased by 9.9%; water supply, sewerage, waste management, and remediation activities increased by 12.1%; only the mining industry decreased by 7%. Notably, production in July in Ho Chi Minh City showed recovery in all three indicators: IIP increased by 9.6%, processing and manufacturing consumption increased by 13.4%, and inventory decreased by 17.8%.
According to the Ministry of Industry and Trade (MoIT), some key industrial products in the first 7 months of 2024 increased significantly compared to the same period last year. Notably, steel bars and angles increased by 31.4%; rolled steel increased by 17.8%; woven fabrics from natural fibers increased by 17.0%; NPK compound fertilizer increased by 14.2%; milk powder increased by 12.3%; refined sugar increased by 12.0%; and phone components increased by 11.7%.
Although maintaining a growth momentum, MoIT assessed that industrial production growth was not comprehensive as there were still 6 localities with a decrease in the IIP index; some manufacturing industries had a decrease in the industrial production index; and some key industrial products decreased compared to the same period last year. Notably, the steel and construction materials industries faced difficulties due to the continued stagnation of the domestic real estate market and decreased global demand, with oversupply, and both domestic and export orders decreasing.
Industrial enterprises continue to face many difficulties due to difficulties in accessing capital despite interest rate reductions, increased import costs of raw materials along with the high exchange rate of the US dollar, and increased logistics costs, reducing the price competitiveness of export products; the domestic production sector is highly dependent on imported raw materials from abroad;
The level of linkage and business cooperation between enterprises in the same industry and between industries is still limited; the linkage between FDI enterprises and domestic enterprises is still slow, so it has not promoted the development of management skills, technology transfer, and the formation of supply chains of materials, raw materials, and industry clusters. The strong participation of domestic enterprises in global production and supply chains has not been significantly improved.
Enhancing product competitiveness
At the trade promotion coordination conference with the overseas commercial system at the end of July, Mr. Pham Tuan Anh, Deputy Director of the Department of Industry (Ministry of Industry and Trade), said that there need to be many measures to support production and stimulate consumption, and to release inventory.
Accordingly, there needs to be support and facilitation from the government, ministries, sectors, the banking system, and localities to continue taking more active measures to support industrial production, especially the output of production through measures to stimulate domestic consumption, strengthen trade promotion to expand export orders, and release inventory.
Localities need to urgently have policies and solutions to support industrial enterprises, especially processing and manufacturing enterprises, so that enterprises can have stable production and business conditions. Build and effectively implement industrial and supporting industry development programs in the locality, focusing on improving the capacity of small and medium-sized enterprises.
Production and business units need to closely follow the market, expand their search for new customers; strengthen the connection between the production and consumption chain; balance inventory and consumption to ensure cash flow as well as product quality, and arrange flexible production to maintain optimal production operations.
“Importantly, associations and industries need to strengthen their activities to connect businesses and promote the consumption of each other’s products,” said the head of the Department of Industry, and also suggested that businesses need to restructure, reduce costs and production costs to enhance the competitiveness of products, thereby improving efficiency and adapting flexibly to the new situation.
In particular, enterprises and industry associations need to take full advantage of opportunities from new-generation Free Trade Agreements to seek new orders and customers. Be more proactive in cooperating with businesses in the industry, associations, and government agencies to seek and expand new export markets in addition to traditional markets, reducing inventory pressure. The Department of Industry will focus on key solutions to effectively implement the support policies for enterprises that have been approved by the Government to remove difficulties and obstacles in the production and business activities of enterprises; especially in key export industries such as textiles, footwear, and basic industries such as automobiles, mechanics, and steel… Promote the operation of new industrial production projects to serve exports and domestic consumption, increase production capacity and supply sources for exports.
