Vietnam’s manufacturing sector recovers in November

The Vietnamese manufacturing sector returned to growth in November, as output increased for the first time in three months and new orders expanded at a faster pace, according to a report launched today, December 2, by IHS Markit.

 

The Vietnam Manufacturing Purchasing Managers’ Index (PMI) registered 51.0 in November, up from the neutral reading of 50.0 in October, signaling a marginal improvement in the health of the sector.

Business conditions have now strengthened in all but one month across the past four years. Production increased for the first time in three months during November, following marginal reductions in September and October.

Where output rose, panelists generally linked this to higher new orders, which expanded more quickly than in October. New business has now increased each month for the past four years.

Improved customer demand and the securing of new clients were reportedly behind the rise in new work. The growth of new export orders also picked up last month.

Employment rose for the first time in three months amid increased new orders. Despite the increased capacity and a return to growth in production, firms reported another modest accumulation of backlogs of work.

The latest data signaled a continued lack of inflationary pressure within the sector. Input costs rose only marginally and at the weakest pace in the current 11-month sequence of inflation.

According to the report, this lack of pressure on input costs meant that manufacturers were able to offer discounts to their customers. Output prices decreased, following the first increase in almost a year in October.

The need to support increases in output amid higher new orders encouraged firms to expand their purchasing activity during November. The modest rise in input buying followed no change in the previous month, and contributed to an accumulation of stocks of purchases.

Firms were helped in their purchasing efforts by the hastening of suppliers' delivery times, the first time this has been the case in four months.

Business sentiment dipped from October but remained positive as some two-fifths of respondents predicted an increase in output over the coming year. According to survey participants, optimism was centered on the expected growth of new orders and efforts to expand capacity.

Andrew Harker, associate director at IHS Markit, said: “Some positive news on the Vietnamese manufacturing sector was evident from the latest PMI dataset, with output up for the first time in three months and a return to employment growth signaled. This suggests that the recent soft patch may be coming to an end.

“Firms are still playing catch-up to some degree from restrictions to output and capacity in recent months, however, with backlogs of work continuing to rise and stocks needed to help supplement production. This bodes well for trends in output and employment in the coming months as firms continue efforts to meet ongoing rises in new orders,” Harker added.

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