Manufacturing output rises at fastest pace, says HSBC

The Hong Kong and Shanghai Banking Corporation (HSBC)’s Purchasing Managers’ Index (PMI) report showed that business conditions in the Vietnamese manufacturing sector improved in December as output and employment increased at sharper rates supported by new order growth.

Meanwhile, purchasing activity rose at the fastest pace in the series history. The rate of input cost inflation accelerated slightly, but manufacturers lowered their output prices in an attempt to support growth of new business, said the report.

The headline seasonally adjusted PMI – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – posted 51.8 in December, up from 50.3 in November. The reading signalled a fourth successive monthly improvement in operating conditions, and the second-strongest in the history of the series.

New orders increased for the third time in the past four months during December as panellists reported improving client demand. Moreover, new business rose at a pace that was only slightly slower than October’s series record. On the other hand, new export orders decreased for a second consecutive month.

Growth of new orders led firms to raise their production. Stocks of finished goods fell solidly as firms delivered products to customers. The depletion of post-production inventories was the strongest in seven months.

HSBS said rising workloads had a positive impact on employment in December, with the rate of job creation picking up to the strongest in three months. Meanwhile, the rate of expansion of purchasing activity hit a record high as panellists reported a greater need for inputs in response to rising client demand.

Input prices increased further in December, with some panellists linking inflation to a scarcity of raw materials. In contrast, manufacturers lowered their output prices for the first time in three months. According to panellists, attempts to encourage new business had been behind the fall in charges, while competitive pressures were also mentioned.

HSBC Asia Economist Trinh Nguyen said the manufacturing sector continues to punch its weight in stabilizing growth in Vietnam.

“The rise of the new orders sub-index is a sign of gradually rising domestic demand, albeit slowly. The new export orders index improved slightly but external demand was still a drag. We expect demand for employment and quantity of purchases to offset sluggish growth in other sectors. We expect 2014 to be a slightly better year, with the manufacturing sector providing an anchor,” she predicted.