HSBC Vietnam Manufacturing PMI: New orders return to growth in September
HSBC Vietnam Manufacturing PMI: New orders return to growth in September
- Solid rise in new business following fall in August
- Employment increases marginally
- Input costs rise at weakest pace since June 2013
A return to growth of new orders contributed to an improvement in operating conditions in the Vietnamese manufacturing sector at the end of the third quarter of the year. However, rates of growth in output and employment were only slight following the dip in new business recorded during August. Meanwhile, the rate of input cost inflation eased for the second month running and was the slowest since June 2013.
The headline seasonally adjusted Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – rose to 51.7 in September from 50.3 in the previous month. The reading signalled a stronger improvement in operating conditions in the sector than in August, albeit one that remained only modest. Business conditions have now strengthened in each of the past 13 months.
The improvement in operating conditions was helped by a rebound in new orders, which increased solidly following a decline in August. Panellists reported that customer demand had increased during the month. Meanwhile, new export orders also returned to growth.
Manufacturers responded to the rise in new orders by increasing production, extending the current sequence of growth to 12 months. The rate of expansion quickened to the fastest in three months, but remained slight.
The fall in new orders in August had enabled firms to work through outstanding business, leading backlogs of work to decrease solidly in September. Moreover, the rate of decline was the strongest since August 2013.
A rise in employment was recorded in September following no change in the previous month. That said, the rate of job creation was only marginal. Where employment increased, this was linked to rising production requirements.
The rate of input cost inflation eased further in September and was the weakest since June 2013. Where input prices did increase, this was linked to higher transportation costs. Output prices were broadly unchanged during the month. While some respondents increased charges in response to higher input prices, competition and efforts to boost new business had led a number of firms to lower their output prices.
Stocks of both purchases and finished goods increased in September amid reports of attempts to build inventory reserves. This was also a factor behind a rise in input buying, which grew at the fastest pace in four months. The rate of accumulation in post-production inventories was only marginal, however, amid reports from some
panellists that higher sales had led to a fall in stocks.
Suppliers’ delivery times lengthened marginally, with the latest deterioration in vendor performance the weakest in six months. Where delivery times lengthened, this was linked to the truck weight restrictions and shortages of some materials.
Commenting on the Vietnam Manufacturing PMI™ survey, Trinh Nguyen, Asia Economist at HSBC said: “The pick-up of manufacturing activity reflects improving
external demand. Given that new orders are stronger than inventories, we expect output to continue to expand next month. Easing inflationary pressures also help, as shown by the slower pace of expansion of input prices. We expect the manufacturing sector to perform well into Q4 2014 as the country is competitive in terms of labour, electricity and water costs. Anticipation of good news in 2015 or 2016 regarding trade liberalization will also help the sector.”
HSBC, markit economics
