Manufacturing sector reports August growth

September 06, 2023 | 14:52
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The S&P Global Vietnam Manufacturing Purchasing Managers' Index (PMI) moved back above the 50-point no-change mark for the first time in six months during August as the manufacturing sector resumed growth amid early signs of a potential recovery.
Manufacturing sector reports August growth

At 50.5 points, the index was up from 48.7 points in July, representing a marginal monthly improvement in business conditions for the manufacturing sector. This modest revival comes after earlier signs of increased demand as manufacturers reported the first growth in new orders in six months while new export business increased after a five-month fall. Similarly, manufacturing output increased in August, reversing a five-month trend of decline. However, the rate of increase was again only minor.

Firms have been ramping up their purchasing activity at a steady rate in response to the increase in new orders and higher output requirements. The increase was the first in six months and was the most significant since September 2022.

The employment picture was less positive, however, with firms remaining hesitant to commit to hiring additional staff. August saw a drop in workforce numbers for the sixth month in a row, although the rate of job losses was at its lowest for that period.

Ongoing job losses indicate continued signs of spare capacity in the sector, with work backlogs decreasing for the eighth consecutive month. Firms also recorded a build up of stocks of finished goods for the second month running, amid reports that weak demand had left finished products unsold.

Data from August pointed to a solid increase in input prices, thereby ending a three-month period of decline. A number of experts have linked higher input costs to rising oil prices, while increased food prices were also mentioned. In turn, firms raised their own selling prices, albeit only slightly. The increase in charges was the first since March.

Andrew Harker, economics director at S&P Global Market Intelligence, said, “These latest figures paint a more encouraging picture of the health of the sector than had been the case recently, with output, new orders, exports and purchasing all returning to growth. However, as demand remains quite fragile, it is probably too early to say that the sector is in full recovery mode."

"Another key aspect from this survey was the end of the recent period of falling prices, with both input costs and selling charges up in August, often linked to higher oil prices," he added.

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