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Vietnam Today

November PMI at 56.5

Released at: 17:03, 04/12/2018

November PMI at 56.5

Photo: Duc Thanh

Index up from 53.9 in October, indicating sharp monthly improvement in health of manufacturing sector.

by Minh Do

The Nikkei Vietnam Manufacturing Purchasing Managers’ Index (PMI) - a composite single-figure indicator of manufacturing performance - rose to 56.5 in November from 53.9 in October and signaled a sharp monthly improvement in the health of the manufacturing sector.

“Vietnam’s manufacturing sector continued to defy recent signs of slowing demand elsewhere in the global economy during November, seeing a strong and accelerated increase in new orders and a near-record rise in output,” said Mr. Andrew Harker, Associate Director at IHS Markit, which prepares the PMI. “Moreover, firms seem confident that the good news will continue, prompting them to build inventories and take on staff at the sharpest rates seen in the near eight years the survey has been conducted.”

Vietnamese manufacturing business conditions improved to one of the greatest extents in the eight years during November, amid strong and accelerated expansion of output and new orders. Inventory building was a feature, with record rises in stocks of both purchases and finished goods as firms prepared for future workloads. Employment also increased at a survey-high pace and business confidence jumped.

The consumer goods sector was the strongest performer of the three broad sectors covered in the latest survey period, seeing the fastest rises in output, new orders, and employment.

New orders increased sharply in November, with the rate of expansion quickening for a second month in a row. New export business, meanwhile, rose at the same marked pace as total new business.

Strong growth of new orders encouraged manufacturers to increase production. Moreover, the rate of output growth quickened to the fastest rate since March 2011. Output also looks set to increase further over the coming year as strong demand boosted manufacturers’ confidence. Sentiment jumped from that seen in October and was the highest since February 2016.

There were signs of capacity pressures returning to the sector as backlogs of work increased for the first time in six months and to the greatest extent since August 2017. Firms responded to greater workloads by taking on extra staff, and at a rapid rate. In fact, the pace of job creation was the fastest in the survey’s history, surpassing the previous record seen in June.

Manufacturers increased their stocks of both inputs and finished goods at record rates as firms responded to higher new orders and prepared for likely further rises in sales in coming months. The accumulation of pre-production inventories was helped by a marked acceleration in the rate of growth of purchasing activity.

Higher raw material prices resulted in a further increase in input costs in November, and one that was the most marked in three months. Rising cost burdens led manufacturers to increase their selling prices, the first time in three months in which this has been the case.

A number of panelists mentioned that shortages of materials had contributed to higher prices for inputs, with supply issues leading some firms to report longer times for the delivery of inputs. That said, other manufacturers reported that their suppliers had been well prepared and had reduced lead times. Overall, vendor delivery times were broadly unchanged.

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