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Vietnam Today

PMI: November Index up from October

Released at: 16:10, 03/12/2019

PMI: November Index up from October

Photo: Viet Tuan

Output growth seen for first time in three months, according to latest IHS Markit report released on December 2.

by Minh Do

The Vietnam Manufacturing Purchasing Managers’ Index registered 51.0 in November, up from the neutral reading of 50.0 in October. The PMI signaled a marginal improvement in the health of the sector. Business conditions have now strengthened in all but one month in the last four years. Production increased for the first time in three months during November, following marginal reductions in September and October.

Vietnam’s manufacturing sector returned to growth in November, as output increased for the first time in three months and new orders expanded at a faster pace. Employment also returned to growth midway through the final quarter of the year. Meanwhile, the rate of input cost inflation softened to an eleven-month low, with output prices reduced accordingly.

“Some positive news on the Vietnamese manufacturing sector was evident from the latest PMI dataset, with output up for the first time in three months and a return to employment growth signaled,” said Mr. Andrew Harker, Associate Director at IHS Markit. “This suggests that the recent soft patch may be coming to an end. Firms are still playing catch-up to some degree from restrictions to output and capacity in recent months, however, seeing backlogs of work continue to rise and needing to use stocks to help supplement production. This bodes well for trends in output and employment in coming months as firms continue efforts to meet ongoing rises in new orders.

Where output rose, panelists generally linked this to higher new orders, which expanded more quickly than in October. New business has now increased in each month throughout the past four years. Improved customer demand and the securing of new clients were reportedly behind the rise in new work. Growth of new export orders also picked up in November. Employment rose for the first time in three months amid increased new orders. Despite greater capacity and a return to growth of production, firms reported another modest accumulation of backlogs of work.

Latest data signaled a continued lack of inflationary pressures within the sector. Input costs rose only marginally and at the weakest pace in the current eleven-month sequence of inflation. This lack of pressure on input costs meant that manufacturers were able to offer discounts to customers. Output prices decreased, following a first increase in almost a year in October. The need to support increases in output amid higher new orders encouraged firms to expand their purchasing activity during November. The modest rise in input buying followed no change in the previous month, and contributed to an accumulation of stocks of purchases.

Firms were helped in their purchasing efforts by a quickening of suppliers’ delivery times, the first time this has been the case in four months.

Stocks of finished goods, meanwhile, fell for the second month in a row. Some panelists indicated that they had used post-production inventories to help meet new orders following slight reductions in output in previous months.

Business sentiment dipped from October, but remained positive as around two-fifths of respondents predicted an increase in output over the coming year. According to survey participants, optimism was centered on expected growth of new orders and efforts to expand capacity.

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