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December PMI up at 51.3

Released at: 09:00, 05/01/2016

December PMI up at 51.3

Purchasing Managers' Index back above no-change mark according to latest report from Nikkei and Markit Economics.

by Thu Hoang

The Nikkei Vietnam Manufacturing Purchasing Managers’ Index (PMI), a composite single-figure indicator of manufacturing performance, rose back above the 50.0 no-change mark in December, posting 51.3 from 49.4 in November. The rate of improvement in business conditions, however, was only modest, according to the latest report from Nikkei and Markit Economics.

“It was something of a relief to see the Vietnam PMI bounce back above the 50.0 no-change mark in December as it suggests that the recent soft-patch experienced both at home and in the wider region may have passed its worst point,” said Mr. Andrew Harker from Markit, which compiles the survey.

A particular positive from the latest survey was a return to growth in new export orders after six successive months of decline. “Overall, 2015 was a mixed year for the sector, with strong growth in the first half followed by a slowdown and broad stagnation in the second half,” he added. “Firms will be hoping to see demand pick up further as we move into 2016.”

Supporting the strengthening of the health of the sector was a first rise in new orders in four months amid improving client demand, according to the report. New export orders also returned to growth in December, with the solid expansion the first since May.

Increasing new business resulted in a rise in manufacturing production during the month, following no change in November. “Output growth was led by investment goods producers, while an increase was also seen in the consumer goods sector,” the report stated.

Despite the rise in new orders, there was still evidence of spare capacity at manufacturers as backlogs of work decreased for the sixth time in the past seven months.

Employment also returned to growth in the final month of the year. “Staffing levels increased for the eighth time in the past nine months, albeit only marginally,” the report noted.

Falling input prices continued to be recorded in the sector during December, with firms linking this to lower raw material costs. Oil was highlighted by panelists as being down in price over the month. Input costs have now fallen in each of the past six months.

With input prices continuing to decline, manufacturers lowered their selling prices accordingly. Charges have decreased in each month since October 2014, with the rate of deflation remaining solid in the latest survey period.

According to the report, vendor delivery times lengthened slightly, ending a four-month sequence of improving performance. Panelists linked longer lead times to a shortage of materials at suppliers.

Vietnamese manufacturers raised their input buying for the first time in four months in response to increased new business. This led to a marginal accumulation of stocks of purchases, following a fall in November.

Meanwhile, stocks of finished goods were unchanged during the month. “Some panelists reported that higher production and delays in delivering products to customers had led inventories to rise, but others mentioned that increasing new orders had resulted in stock reductions,” the report stated.

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