Manufacturing PMI Signals Marginal Worsening of Vietnam’s Operating Conditions
The HSBC Vietnam Manufacturing PMI signalled a further worsening of manufacturing sector operating conditions during September, although the rate of deterioration was only slight. This was highlighted by a rise in the headline index from 47.9 to a five-month high of 49.2.
September data showed that manufacturing output was little changed since the month before, following a solid reduction one month previously. Meanwhile, new orders decreased again in September, with panellists largely attributing this to subdued market demand conditions. The rate of decline in new work was the weakest in the current five-month period of contraction, however, and only modest.
Trinh Nguyen, Asia Economist at HSBC said: “The stabilisation of manufacturing activity in Vietnam is
a positive development, especially given the downturn of the global trade cycle and the still-fragile domestic business environment. New export orders continue to contract but, at close to 50.0, the print for the Output Index is in line with our view that growth will pick up in the fourth quarter. With inflation picking up significantly, as indicated by the rise in input prices, the SBV will hold rates steady for the rest of the year.”
In contrast, the pace of reduction in new export business accelerated since the month before. Although only modest, the latest decrease in foreign orders was the sharpest recorded by the series to date.
The size of the Vietnamese manufacturing sector workforce was little changed in September. Meanwhile, backlogs of work declined at a sharp rate that was the steepest in the short series history. The latest decrease in outstanding business extended the current period of reduction to six months.
Purchasing activity continued to fall in September. The rate of decline in input buying was only slight, however, having eased markedly for a second successive month.
Stocks of purchases fell as a result, although the rate of decline was the slowest since November 2011.
Meanwhile, companies continued to report shorter lead times from vendors, largely reflective of sufficient stock of inputs at suppliers.
Average input costs faced by goods producers rose for a second successive month in September, with the rate
of inflation accelerating to a five-month high. The overwhelming reason given by panellists for a rise in
average prices was that raw material costs had increased over the month. Some survey respondents
also mentioned higher prices paid for fuel.
Despite the rise in average costs, goods producers reduced their output charges during September in an
attempt to attract new business. The rate of output price discounting was only slight, however.