HSBC Vietnam Manufacturing PMI™
HSBC Vietnam Manufacturing PMI™
Employment growth picks up as output continues to rise
Summary
Business conditions in the Vietnamese manufacturing sector improved slightly in October as output and new orders increased and firms took on extra staff at the strongest pace since January. The rate of cost inflation slowed for the third consecutive month and firms were able to pass on some cost reductions to their clients by way of lower output prices. Meanwhile, suppliers’ delivery times shortened for the first time in ten months.
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–posted 51.0 in October, down slightly from 51.7 in September but still signalling an overall improvement in operating conditions in the sector. Business conditions have now strengthened in each of the past 14 months.
Manufacturers in Vietnam saw new orders increase for the second month running following a marginal decline in August, although the latest expansion was weaker than seen in September. Some panellists reported that overall new orders had been boosted by new export sales which increased at the fastest pace in six months.
Higher new orders led firms to raise production for the thirteenth month running in October, although the rate of growth was only slight. Some respondents mentioned
that the solid increase in new orders in September had supported output growth in October.
Increased output requirements was the main factor behind a second successive monthly rise in employment. Furthermore, the rate of job creation was the joint-fastest seen so far this year. This added capacity enabled manufacturers to work through outstanding business, with backlogs of work decreasing for the sixth successive month.
Although input prices continued to rise in October, the rate of inflation slowed for the third consecutive month and was the weakest since June 2013. While some panellists reported that suppliers had raised charges, others signalled falling prices in world commodity markets. Cost savings enabled some firms to lower their output prices, leading to the first overall reduction in charges in the sector since May.
Suppliers’ delivery times shortened in October, ending a seven-month sequence of lengthening lead times. According to respondents, vendors had been able to respond favourably to requests for faster deliveries as a result of sufficient stock holdings.
Manufacturers raised their purchasing activity slightly,with panellists linking the increase to higher new orders.Despite higher input buying, stocks of purchasesdecreased as inputs were used in the productionprocess. Stocks of finished goods increased as items were held prior to delivery to clients. The rate ofaccumulation was marginal, has had been the case in the previous month.
Comment
Commenting on the Vietnam Manufacturing PMI™ survey, Trinh Nguyen, Asia Economist at HSBC said:“Vietnam is on a gradual path to economic recovery. The October PMI shows that the manufacturing sector continues to expand on higher export orders, highlighting the country's competitiveness in labour intensive manufacturing. The employment index grew sharply, a positive sign of manufacturers' outlook for future demand. We expect the sector to continue to grow on better external demand. What's left is for domestic sectors to kick in, allowing Vietnam to return to its long-run average.”
HSBC, Markit Economics
