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ECONOMY

Vietnam’s PMI rebounds in October

Updated at Thursday, 01 Nov 2018, 08:10
The Hanoitimes - All five sub-components of the PMI contributed to the upward movement recorded at the start of the final quarter of 2018.
The headline Nikkei Vietnam Manufacturing Purchasing Managers' index (PMI) climbed from a ten-month low of 51.5 in September to 53.9 in October, pointing to the strongest improvement in the health of the sector since July, according to Nikkei and IHS Markit.

All five sub-components of the PMI contributed to the upward movement recorded at the start of the final quarter of 2018.

A reading below the 50 neutral mark indicates no change from the previous month, while a reading below 50 indicates contractions and above 50 points to an expansion.

New business increased markedly and at a quicker pace than in September, supported by favorable demand conditions internally and externally. Indeed, new export orders rose at the fastest rate in three months as companies benefited from expansion into new markets and greater client bases. Subsequently, manufacturers scaled up production for the eleventh month running, with growth the sharpest since July. 

Despite the uptick in sales, manufacturers were able to keep on top of their workloads, as highlighted by a further decline in unfinished business. One factor that supported the depletion of backlogs was the hiring of additional workers. Not only did employment expand for the thirty-first month running, but also to the greatest extent since July. According to survey participants, job creation was underpinned by new product lines and robust demand conditions.

Vietnamese manufacturers also stepped up their outlays on raw materials and semi-finished products, with input purchasing expanding solidly and at a quicker pace than seen in September. Strong demand for materials exerted some pressure on supply chains as highlighted by a renewed increase in vendor delivery times. 

The upturn in quantities of purchases aided companies in their stock building initiatives. Holdings of inputs increased markedly in October, with the pace of accumulation the quickest since the survey started in March 2011. Similarly, inventories of finished goods rose solidly and at the quickest pace in almost three-and-a-half years. 

Although input costs continued to increase, the rate of inflation moderated to the weakest in 15 months, encouraging some producers to lower their charges and others to keep selling prices unchanged. Across the manufacturing economy, charges fell for the second straight month, albeit marginally. 

Manufacturers in Vietnam expect product diversification, robust demand conditions and set targets to boost production in the coming 12 months. That said, the overall level of positive sentiment fell in October and was below the series average.

“Vietnamese manufacturers allayed fears of a protracted slowdown across the sector, with stronger rises in output, new orders and employment all recorded in October. The success of firms in continuing to secure greater volumes of new work despite signs of weakening global demand stands them in good stead as the year draws to a close,” said Andrew Harker, associate director at IHS Markit, which compiles the survey.
Ngoc Thuy
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