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Manufacturing sees drop in new orders

Update: September, 04/2014 - 08:58
"Lower new business also impacted stocks of finished goods, which increased at the strongest rate in 13 months, though some panellists also attributed the accumulation of inventories to delays in delivering products to clients".— Photo baodautu

HCM CITY  (VNS) — HSBC's Purchasing Managers' Index for August suggests another slight loss of momentum in the Vietnamese manufacturing sector as output growth slowed and new orders fell slightly.

Released yesterday, the PMI – a snapshot of operating conditions in the manufacturing sector obtained through a poll of purchase executives in around 400 manufacturing companies with a value of above 50 showing an overall increase and below 50, an overall fall – posted 50.3 last month, down from 51.7 in July.

It fell for the fourth consecutive month to signal the weakest improvement in business conditions since last November.

Behind the weaker rise in output was the fall in new orders. Declining client demand was mentioned by those respondents that posted a fall in new work. New export business also decreased, ending a five-month sequence of expansion. Falling new orders led backlogs of work to decrease for the fourth straight month, albeit only modestly.

Lower new business also impacted stocks of finished goods, which increased at the strongest rate in 13 months, though some panellists also attributed the accumulation of inventories to delays in delivering products to clients.

Larger vendor lead times were again a feature of the sector in August as the enforcement of truck weight restrictions continued to delay deliveries. Lead times lengthened for the sixth month in a row, and at a broadly similar pace to that seen in July.

A further sharp rise in input costs was recorded during the month amid increased costs of transportation linked to the tonnage rules and higher fuel costs. But the latest rise in input prices was the slowest since April.

The passing on of higher cost burdens to clients led to a third successive monthly increase in output prices at manufacturing firms, though the inflation rate was only slight.

Staffing levels in the sector remained unchanged on average during August. Some panellists reported having taken on extra staff to help support a rise in production.

Although purchasing activity continued to rise, the rate of expansion was only fractional and the weaker in the current year-long period of growth. Several panellists reported having lowered their purchasing in response to the falling client demand.

A slower rise in input buying meant that pre-production inventories decreased marginally.

Commenting on the PMI survey, Trinh Nguyen, Asia economist at HSBC, said :"The slowdown in activity is expected as new orders are dragged down by weak external and internal conditions. — VNS

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