Production at SCAVI Huế in Thừa Thiên - Huế Province. The S&P Global Vietnam Manufacturing Purchasing Manager’s Index (PMI) rose sharply to 54.7 in June from 50.3 in May. — VNA/VNS Photo Trần Việt

HÀ NỘI — The Vietnamese manufacturing sector expanded sharply at the end of the second quarter with new orders rising at one of the fastest rates on record, prompting firms to ramp up production and purchasing activity, according to S&P Global.

The S&P Global Vietnam Manufacturing Purchasing Manager’s Index (PMI) rose sharply to 54.7 in June from 50.3 in May, not only signalling a third consecutive monthly improvement but also indicating that business conditions strengthened markedly.

The improvement was the joint-strongest since November 2018, equal with those seen in April 2021 and May 2022.

However, the strength of the rise in new orders put pressure on operating capacity with backlogs of work increasing for the second time in three months.

Andrew Harker, economics director at S&P Global Market Intelligence, said: “The Vietnamese manufacturing sector burst into life at the midway point of the year, shrugging off the relatively modest growth seen in recent months thanks to a rapid increase in new orders.

"The strength of the expansion in new work highlighted staff shortages at some firms and resulted in an accumulation of outstanding business. In response, firms took on additional staff at a solid pace," Harker said.

He also noted the growth spurt was accompanied by higher cost burdens, with increased transportation costs in particular acting to push input price inflation to a two-year high.

"Rising inflation could act to dampen demand further down the line, but for now firms will be enjoying the influx of work experienced in June,” he said, adding the rate of input cost inflation also quickened, hitting a two-year high on the back of higher transportation and oil prices in particular. In turn, firms also increased their own selling prices at the fastest pace since June 2022.

The report also pointed out that the prospect of favourable business conditions continuing supported confidence in the year-ahead outlook for manufacturing output. Sentiment hit a three-month high as around half of respondents predicted an expansion. — VNS