HSBC Vietnam Manufacturing PMI: Ongoing growth of manufacturing output, albeit at slower pace

Jul 1st at 16:15

01-07-2014 16:15:57+07:00

Key findings:

• Further rises in output and new orders
• Cost inflation remains strong
• Firms increase output prices

The Vietnamese manufacturing sector continued to see improvements in business conditions in June, although rates of growth in output and new orders eased during the month. The effects of the enforcement of weight rules on trucks continued to disrupt operations, leading to increased input prices and delivery delays. In response to higher cost burdens, panellists raised their prices charged for the first time since January.

The headline seasonally adjusted Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a singlefigure snapshot of operating conditions in the manufacturing economy – posted 52.3 in June, down slightly from 52.5 in May and signalling a further improvement in business conditions in the sector.

Manufacturing new orders rose for the seventh consecutive month in June. The rate of expansion was solid, but slowed for the second month running. Where new business rose, panellists reported improved customer demand. The rate of growth in new export orders also eased during the month and was only slight.

Growth of new orders led to another increase in production, although the effects of attacks on factories in May contributed to the pace of expansion slowing. Manufacturing output has now risen in each of the past nine months.

A weaker rise in new orders led companies to work through their backlogs of work in June. Outstanding business fell for the second month in a row, and at a slightly faster pace than in May.

Panellists continued to report that the enforcement of weight restrictions on trucks added to cost burdens in June. Input prices increased sharply again, albeit at a slightly weaker pace than in May. The tonnage limits also impacted on delivery times, with vendor performance deteriorating sharply again during the month. The rate at which lead times lengthened was only slightly below May’s series record.

Panellists responded to sharp rises in input costs by raising their output prices in June. The increase was modest, but the first since January and the strongest in 15 months. The rate of job creation in the Vietnamese manufacturing sector remained marginal. While higher new orders led some firms to raise their staffing levels, other companies reported that employee resignations had led to a drop in staff numbers.

Purchasing activity continued to increase, extending the current sequence of expansion to ten months. However, the rate of growth eased to the weakest since September 2013. Increased input buying helped companies to build reserves of inventories, with stocks of purchases rising at the sharpest pace since July 2011. Pre-production inventories have increased in two of the past three months.

Finally, stocks of finished goods decreased as firms delivered products to clients.

HSBC