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PMI jumps to 52.3 in April

Released at: 13:48, 04/05/2016

PMI jumps to 52.3 in April

Purchasing Managers' Index rises to nine-month high.

by Thu Hoang

The Nikkei Vietnam Manufacturing Purchasing Managers’ Index (PMI), a composite single-figure indicator of manufacturing performance, rose to a nine-month high of 52.3 in April from 50.7 in March. Business conditions have now improved in each of the past five months, according to the latest report from Nikkei and Markit Economics.

“The recent soft patch in the Vietnamese manufacturing sector appears to have come to an end according to the latest PMI data, which showed the strongest improvement in the health of the sector since July last year,” said Mr. Andrew Harker from Markit, which compiles the survey. Of particular note was a solid expansion in new orders.

“Something else that looks to have come to an end is the recent period of weak inflationary pressures, with input prices rising at the fastest pace in 20 months during April,” he added.

A key driver of the latest improvement in operating conditions was a solid expansion in new business, according to the report. Moreover, the rate of growth was the sharpest since July 2015 amid reports from panelists of increased client demand. New export orders also continued to rise in April.

Increasing new business contributed to a fifth consecutive monthly rise in manufacturing production. The rate of growth was modest but quickened to the fastest in nine months.

Panelists responded to higher new orders by increasing their staffing levels. The rise in employment followed a slight fall in the previous month and was the strongest since May 2015.

Higher staffing levels enabled manufacturers in Vietnam to work through outstanding business and complete projects. “As a result, backlogs of work decreased for the first time in 2016 so far,” the report stated.

Manufacturers recorded a marked increase in input costs during April, with the rate of inflation quickening to the sharpest since August 2014.

Panelists reported higher costs for raw materials, with steel mentioned in particular. Data suggested that the investment goods sector registered a much steeper increase in input prices than the consumer and intermediate goods categories.

With input prices rising, firms increased their charges accordingly. Output price inflation was recorded for the first time in over a year-and-a-half, although the rise was only marginal, the report noted.

Purchasing activity increased in April, with firms linking higher input buying to rising production requirements. Purchasing has now expanded in each of the past five months.

Both stocks of purchases and finished goods continued to decrease, although in each case at slower rates than in March. Inventories of both pre- and post-production goods have fallen throughout 2016.

“Finally, suppliers’ delivery times were broadly unchanged, following a marginal improvement during March,” the report stated.

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