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October PMI comes in at 50.1

Released at: 20:28, 02/11/2015

October PMI comes in at 50.1

Negligible change in business conditions seen in October but index up over September.

by Thu Hoang

The Nikkei Vietnam Manufacturing Purchasing Managers’ Index (PMI), a composite single-figure indicator of manufacturing performance, posted 50.1 in October, only fractionally above the 50.0 “no-change” mark and thereby signaling little change in business conditions over the month. The reading was up from the 49.5 recorded in September, according to the latest report from Nikkei and Markit Economics.

Vietnam’s manufacturing sector stabilized in October, providing some reassurance that the deterioration seen in September was not the start of a prolonged downwards trend, according to Mr. Andrew Harker from Markit.

That said, the strong growth seen earlier in the year now seems a long way off, with external markets looking to be the key headwind at present, the report stated. Firms will hope for an improvement in global economic conditions to help support a return to growth. “Falling raw material costs were again recorded in October, leading both input prices and output charges to decrease further,” Mr. Harker said. “However, the respective rates of decline eased.”

Helping the headline index to rise back above the 50.0 mark was a marginal increase in production, according to the report. This followed a fall in the previous month.

Those respondents that saw growth in output linked it to higher new orders. However, other panelists saw new business decline, thereby feeding through to lower production.

New business decreased marginally overall in October; the second successive month in which a reduction has been recorded.

“Panelists linked the fall to declining client demand, which was also a factor behind a fifth consecutive monthly contraction in new export orders,” the report added.

Lower new business resulted in spare capacity at Vietnamese manufacturers and a subsequent reduction in backlogs of work. This also led to a third successive monthly slowdown in the rate of job creation. “The latest increase in employment was only slight,” according to the report.

Manufacturers in Vietnam continued to report falling raw material prices during October, feeding through to reductions in both input costs and output prices. In both cases the rate of decline was solid but the weakest in three months. Input prices have fallen continuously since July.

A second successive monthly reduction in purchasing activity was posted, with panelists indicating that holdings of inputs were sufficient to meet output requirements. Consistent with this was a marginal increase in stocks of purchases, ending a three-month sequence of depletion.

Stocks of finished goods also rose, as was the case in September. According to respondents, an increase in production, a fall in new orders, and delays in distributing products to customers all contributed to the increase in post-production inventories.

Suppliers’ delivery times, meanwhile, improved for the third month in a row amid reports that reduced workloads had enabled them to cut lead times.

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