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Vietnam Today

PMI: Output growth at four-month high as new orders expand solidly

Released at: 09:31, 01/04/2019

PMI: Output growth at four-month high as new orders expand solidly

Photo: vietnambiz

Vietnamese manufacturers see growth pick up at end of first quarter, according to latest report from IHS Markit.

by Minh Do

The Nikkei Vietnam Manufacturing Purchasing Managers’ Index (PMI) - a composite single-figure indicator of manufacturing performance - posted 51.9 in March, up from 51.2 in February and signaling an improvement in the health of the sector for the 40th successive month. Although registering below the 2018 average, the PMI was comfortably above the 50.0 no-change mark at the end of the first quarter.

Vietnam’s manufacturing sector continued to expand at the end of the first quarter, with signs of growth picking up during March. Output increased at the fastest pace since November last year, while total new business and exports also rose more quickly than in February. Employment continued to decline marginally, however. The rate of input cost inflation remained relatively weak, providing scope for firms to lower their output prices again.

“While still some way short of the strong growth rates recorded last year, the manufacturing PMI data for March suggest that Vietnamese firms have weathered the recent slowdown in global trade and were able to continue to secure greater new order volumes and expand production,” said Mr. Andrew Harker, Associate Director at IHS Markit, which produces the report. “IHS Markit currently forecasts industrial production to grow 8.2 per cent in 2019, with PMI data suggesting that the manufacturing sector will continue to contribute positively to this.”

New orders rose for the 40th month in a row during March amid increased customer numbers and growth in new export business. Moreover, the rate of expansion in total new orders was the fastest in three months.

The rate of growth in manufacturing production, meanwhile, quickened for the second successive month and was slightly faster than that seen for new business. This enabled firms to reduce their backlogs of work and add to stocks of finished goods. That said, the latest depletion of outstanding business was only marginal and the slowest in the current three-month sequence of decline.

The increase in output was recorded in spite of a slight reduction in staffing levels in March. Panelists suggested that employee resignations had hampered their efforts to expand workforce numbers in response to greater workloads.

Nikkei Vietnam Manufacturing PMI

Sources: Nikkei, IHS Markit

As has been the case throughout 2019 so far, inflationary pressures remained muted in the sector at the end of the first quarter. Input costs rose marginally and at a pace that was well below the series average. This lack of pressure on costs meant that firms were again able to offer discounts to customers. Charges decreased for the fourth consecutive month, albeit fractionally.

Manufacturers in Vietnam responded to higher output requirements by increasing their purchasing activity sharply, with the rate of expansion the fastest year-to-date. Stocks of purchases decreased, however, as inputs were used to support production growth. The fall in input inventories was the second in as many months.

Meanwhile, the first meaningful shortening of suppliers’ delivery times in over two years was recorded, following broadly unchanged vendor performance in February.

Almost half of all respondents to the latest survey predict output to increase over the coming year. Strong optimism reflected expected improvements in market demand and investment in expanding productive capacity. These factors are forecast to help firms meet their plans for higher output. Confidence was higher than in February and broadly in line with the series average.

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