HSBC report shows higher prices, stable economy

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The bank’s purchasing manager’s index (PMI) for Vietnam’s manufacturing industry rose from 48.5 to 49.4, showed the macroeconomic report.

Vietnam’s exports, said the study, are expected to pick up in coming months, though domestic demand will be lacklustre. Although the report did reflect stable inflation, it did indicate the possibility of coming challenges as prices for energy, education, and healthcare rose in August.

HSBC explained that Vietnam has a history of rising inflation in August, with the two highest peaks of the last decade coming in August 2008 (28.3 per cent) and August 2011 (23 per cent).

The country’s consumer price index (CPI) rose to 7.5 per cent in August against 7.3 per cent last year as the country raised social service and energy fees.

HSBC said they expected headline inflation to continue to rise in September, but that CPI would stay below 8 per cent.

The report noted that the country has made significant strides in minimising its high-risk investments and focusing more on stable, sustainable growth. Manufacturing PMI for August is still weak as demand, and therefore, production has fallen. It is expected that demand will mount a recovery toward the end of the year.

Global PMI indices from the US to China all show improvement, suggesting that demand for Vietnamese goods will rise in the fourth quarter, it explained.

The bank’s report highlighted the export sector as the principle force driving the economy at this time, supported by foreign direct investment inflows, particularly those from Japanese investors. This has helped mitigate the consequences of domestic problems, and kept the labour market afloat.

The report concluded that the economy will grow at a sub-trend pace of around 5 per cent over the next two years.