Vietnam experiences solid rise in production

The S&P Global Vietnam Manufacturing Purchasing Managers' Index (PMI) registered 52.5 in September, a fraction lower than the reading of 52.7 in August but still pointing to a solid improvement in business conditions across the sector. Operating conditions have now strengthened in each of the past 12 months.

Likewise, the current sequence of new order growth also extended to a year as new business expanded solidly in September amid reports of improving customer demand. That said, the rate of increase softened from August. This was also the case with regards to new export orders, where some respondents mentioned signs of demand weakness in export markets. The rise in new business from abroad was the slowest in ten months.

With total new orders continuing to increase, manufacturers expanded their production solidly. The rate of growth was broadly in line with that seen in the previous month.

The Vietnamese manufacturing sector maintained its growing momentum in Semtember as new manufacturing orders continued to rise, fuelling growth of output, employment and purchasing activity.

Similarly, employment and purchasing activity each rose solidly again at the end of the third quarter. As well as responding to higher production requirements, firms also increased staffing levels to support new production lines.

Capacity expansions enabled firms to keep on top of workloads despite ongoing new order growth, as evidenced by a second successive reduction in backlogs of work.

Renewed inventory building was signalled across the manufacturing sector in September. Stocks of purchases increased for the first time in six months, linked to rising new orders and fuelled by higher purchasing activity.

Similarly, stocks of finished goods increased for the first time since February, and to the greatest extent in close to a year-and-a-half. Some respondents indicated that finished goods inventories had risen due to sales volumes coming in below expectations during the month.

Andrew Harker, director of Economics at S&P Global Market Intelligence said, “The Vietnamese manufacturing sector continued to tick along nicely at the end of the third quarter, with the PMI now having signalled overall expansion throughout the past year. A much more benign price and supply environment is providing support, while demand also improved again in September."

Harker added, "There were some tentative signs of new order growth slowing, however, particularly with regards to exports. This was a factor in a renewed expansion in stocks of finished goods as some firms sold fewer items than expected. This may lead manufacturers to limit production growth in October, but business confidence remained strong and so the prospects for the final three months of the year appear positive overall."

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