Vietnam Manufacturing PMI rises to its highest level since September 2011
Vietnam Manufacturing PMI rises to its highest level since September 2011
“The rebound of manufacturing activity is anticipated and much-needed. The expansion is supported by stronger credit growth as well as relatively benign inflation, while export demand remains weak. Looking ahead, we expect a gradual pick-up of economic activity supported by both domestic demand and a gradual recovery in China.”
Sources: Markit, HSBC
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Key points
- Higher PMI reading driven by output and new order growth
- Job creation recorded for second month running
- Input price inflation continues to slow
Summary
At 50.5 in November, up from 48.7 in October, the seasonally adjusted HSBC Vietnam Manufacturing PMI posted above the neutral 50.0 value for the first time in 14 months. Although the index pointed to only a marginal improvement in overall manufacturing business conditions, the latest reading was the highest since September 2011.
The improvement in operating conditions reflected returns to growth in both production levels and new orders during November. Output increased at the most marked pace since September 2011, thereby ending a seven-month period of contraction. Support to production levels was mainly provided by domestic demand in November, as new export order volumes continued to decline. Survey respondents commented on relatively subdued demand within Asia and the ongoing economic downturn across Europe.
Overall new business levels nonetheless returned to growth in November, which ended a six-month sequence of contraction. Although the latest rise in new orders was only modest, the rate of expansion was the strongest since April 2011. Backlogs of work meanwhile decreased for the eighth consecutive month, suggesting a general lack of pressure on operating capacity across the Vietnam manufacturing sector.
Another rise in staffing levels contributed to the latest reduction in work outstanding across the sector. The pace of job creation picked up slightly since October and was the most marked for a year.
Higher production requirements and stronger new business inflows resulted in an expansion of input buying for the first time since March. This did not prevent a thirteenth successive monthly decline in stocks of purchases in the manufacturing sector. Anecdotal evidence suggested that lower pre-production inventory levels reflected stronger-than-expected output in November. Improved sales also contributed to a solid drop in stocks of finished goods, with the rate of decline in post-production inventories the fastest for a year.
November data provided some evidence that price discounting strategies supported new business gains in the Vietnam manufacturing sector. Factory gate prices decreased for the seventh month running and at the fastest pace since August. Average cost burdens meanwhile continued to rise during November, driven by rising oil-related prices. That said, the rate of cost inflation eased further from the five-month high registered in September.
Comment
Commenting on the Vietnam Manufacturing PMI™ survey, Trinh Nguyen, Asia Economist at HSBC said:
“The rebound of manufacturing activity is anticipated and much-needed. The expansion is supported by stronger credit growth as well as relatively benign inflation, while export demand remains weak. Looking ahead, we expect a gradual pick-up of economic activity supported by both domestic demand and a gradual recovery in China.”
HSBC
