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Vietnam Today

Manufacturing PMI eases in July

Released at: 15:24, 01/08/2018

Manufacturing PMI eases in July

Photo: Duc Thanh

Manufacturing Purchasing Managers' Index slips to 54.9 in July from 55.7 in June.

by Minh Do

Nikkei Vietnam Manufacturing Purchasing Managers’ IndexTM (PMI®) – a composite single-figure indicator of manufacturing performance – posted 54.9 in July, down marginally from 55.7 in June. However, it's still one of the highest since the survey began in March 2011. Business conditions have also strengthened over the past 32 months.

Growth in the Vietnamese manufacturing sector remained high in July, with rates of expansion in both output and new orders easing only slightly from those seen in June. The main highlight from the latest survey was a rebound in the pace of growth for new export orders to a near-record high. To respond to higher workloads, manufacturers considerably increased their staffing levels and purchasing activity again.

“The Vietnam manufacturing PMI remained elevated in July as the sector continued to grow strongly. Supporting the overall expansion in the latest survey period was an accelerated increase of new export orders," said Mr. Andrew Harker, Associate Director at IHS Markit. "Confidence in the future was meanwhile illustrated by firms' efforts to build inventory reserves in order to prepare for further production growth and to further solid hiring.”

Vietnam maintained its lead in the ASEAN manufacturing PMI rankings, registering another solid improvement in its goods-producing sector in July.

Manufacturing new orders continued to increase at a substantial pace in July, with the rate of growth only fractionally weaker than June’s 87- month high. Respondents indicated that the rise in new business was in line with stronger client demands. The rate of growth in new export orders increased in July and was only slightly slower than May’s series record.

Firms responded to the increase of new orders by increasing output again in the latest survey period. The rate of expansion remained sharp, despite easing from the previous month. All three broad sectors saw increases in output.

In July, the strong increase in output was sufficient enough to reduce backlogs of work for the second month running, albeit marginally.

Also in July, higher workloads encouraged manufacturers to increase their staffing and purchasing activity. The rate of job creation was solid, despite easing from June’s record high. Meanwhile, input buying rose at a substantial pace amid some reports of efforts to build inventory reserves.

Stocks of both purchases and finished goods increased. The rate of accumulation of preproduction inventories accelerated to a five-month high, while stocks of finished goods increased modestly in July following a fall in June.

The rate of input cost inflation remained high at the start of the third quarter. Panelists linked higher prices to raw material shortages. The passing on of increased input costs to customers resulted in a further monthly rise in output prices, with the rate of inflation little-changed from that seen in June.

Suppliers’ delivery times were unchanged in July, thereby ending a 17-month period of lengthening lead times. Raw material shortages reportedly led to delays, but this was counteracted by a willingness by suppliers to respond to requests for quicker deliveries.

Forecasts of further growth of new business over the next 12 months fueled optimism that output would continue to rise. Business confidence picked up from the previous month, with close to 51 per cent of respondents predicting an increase in production.

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