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Vietnam Today

July PMI: Sharpest rise in manufacturing output for 8 months

Released at: 13:57, 01/08/2019

July PMI: Sharpest rise in manufacturing output for 8 months

Photo: Viet Tuan

Monthly improvement in business conditions the 44th in as many months.

by Minh Do

The Vietnam Manufacturing Purchasing Managers’ Index (PMI) ticked up to 52.6 in July from 52.5 in June, signaling a further monthly improvement in business conditions; the 44th in as many months.

Vietnam’s manufacturing sector continued to perform well at the start of the third quarter of the year, recording further marked growth in new orders and production. The rate of job creation, however, softened.

Input prices also increased at a weaker pace in July, with muted cost pressures helping feed through to another monthly reduction in selling prices.

Manufacturing production rose sharply in the month, with the rate of expansion quickening for the third month running to its fastest since last November. Firms indicated that they were often able to follow production plans, with higher new orders also contributing to output growth.

“The latest PMI data for Vietnam point to ongoing success for Vietnamese manufacturers during July, with new business growth the fastest year-to-date,” said Mr. Andrew Harker, Associate Director at IHS Markit, which compiles the PMI. “This was despite the joint-weakest rise in exports for 44 months as the US-China trade dispute hampers global trade flows. If anything, firms are not currently able to expand output quickly enough, as evidenced by a second successive rise in backlogs of work. Should the PMI remain around the current level for the rest of the quarter, PMI-based estimates suggest that manufacturing output will be set for further double-digit year-on-year growth in the third quarter.”

New business rose at a solid pace that was the fastest in 2019 so far amid improving customer demand. The rate of expansion in new export orders softened to the joint-weakest in 44 months, however, amid trade tensions between the US and China.

Solid increases in new work added to pressure on capacity at Vietnamese manufacturers. Backlogs rose for the second month running. Firms responded to greater output requirements by taking on additional staff for the third time in four months. That said, the rate of job creation was only slight and weaker than that seen in June.

The rate of input cost inflation softened for the third successive month in July, with some panelists citing China as a source of falling prices. The latest increase in input prices was only slight and the weakest since March.

Relatively soft cost pressures enabled manufacturers to maintain competitive pricing policies at the start of the third quarter, with selling prices reduced for the eighth month running. That said, the rate of decline was only marginal.

Expectations of higher new orders over the next 12 months resulted in continued optimism among manufacturers that production will expand over the coming year. Sentiment picked up from the previous month, with over half of all respondents optimistic regarding the 12-month outlook.

Confidence in the near-term outlook, alongside increases in current workloads, encouraged firms to expand their purchasing activity in July. Input buying rose sharply, and at a broadly similar pace to the previous month. Despite the strong increase in purchasing, pre-production inventories were broadly unchanged as inputs were used to support production. Meanwhile, stocks of finished goods increased slightly, ending a two-month sequence of depletion.

Finally, suppliers’ delivery times improved for the third month running in July, albeit only marginally and to the weakest extent in the current sequence of shortening lead times.

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