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VietNamNews

Vietnamese manufacturing sector reaches 3-year high

Update: May, 06/2014 - 09:18
A production line of the EBA Machinery Corporation in Nomura Industrial Zone in Hai Phong City. The country's Purchasing Managers' Index (PMI) last month hit a new high of 53.1. — VNA/VNS Photo Danh Lam

HCM CITY  (VNS) — The Vietnamese manufacturing sector continued its recent run of improvement in April as the Purchasing Managers' Index (PMI) hit a new high, surpassing the previous best achieved in April 2011, according to an HSBC monthly report.

The headline, seasonally adjusted PMI – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – rose to 53.1 in April from 51.3 in the previous month.

Business conditions have now strengthened in each of the past eight months, with the latest improvement being the strongest in the history of the survey which began in April 2011.

The rate of growth in new orders received by manufacturers accelerated for the second month running in April and was the fastest in the series history.

Improved client demand and broadly stable output prices had reportedly contributed to higher new orders. New business from abroad also rose at a record pace during the month.

Higher new orders and improved productivity led to a seventh successive monthly increase in output in the manufacturing sector. The rate of growth quickened and was second only to that recorded in April 2011.

Rising new orders led manufacturing firms to increase their purchasing activity in April. Furthermore, input buying expanded at a survey-record pace.

This contributed to a first rise in stocks of purchases since October 2013 as some panellists reported having increased inventories in response to expectations of further growth of new business in coming months.

Manufacturers also took on extra staff during the month, following a marginal reduction in employment in March. Job creation has now been recorded in eight of the past nine months.

Rising new business contributed to an increase in the backlog of work, ending a five-month sequence of depletion. Stocks of finished goods also accumulated in April, albeit only marginally. Some panellists indicated that delays in the delivery of goods to clients had contributed to the rise in inventories.

The rate of input cost inflation quickened for the first time in four months. Respondents mainly attributed the increase in input prices to higher shipping costs as a result of new government rules.

This also reportedly had an impact on supplier lead times during the month, with vendors lowering the amount of goods they shipped.

Meanwhile, manufacturing firms lowered their output prices for the second month running

Commenting on the Vietnam Manufacturing PMI survey, Trinh Nguyen, Asia Economist at HSBC, said: "The manufacturing sector is doing the heavy lifting in Viet Nam and its improvement will help bolster beleaguered domestic demand.

"The strong bounce of output, new orders, new export orders, and employment are much needed to counterbalance the domestic slump.

"We expect exports to have another stellar year, in contrast to the rest of the region, due to increased investment into the country in manufacturing and trade negotiations to expand market access.

"We expect growth to accelerate slightly to 5.6 per cent this year from 5.4 per cent in 2013. Most of this will come from the manufacturing and service sectors as construction and agriculture sectors lag behind." — VNS

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