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Vietnam Today

Manufacturing growth at eight-month high

Released at: 14:45, 07/01/2015

Manufacturing growth at eight-month high

HSBC Vietnam releases its December Purchasing Manager's Index.

by Hung Nguyen

HSBC Vietnam released its Purchasing Manager’s Index (PMI) for December on January 5.

Vietnam’s manufacturing sector showed positive signs during the month, with improvements in implementing conditions being the best for eight months, from stronger gains in output and new orders, while companies continued to add to their payroll numbers at a solid rate.

The report indicated some key findings, including:

  • Sharper gains in output and new orders in December;
  • Solid growth of employment;
  • Input and output prices continued to fall.

Data also showed emerging deflationary pressures, with both input and output prices continuing to fall and at faster rates.

The headline seasonally-adjusted PMI, a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing industry, stood at 52.7 in December. This was up from November’s 52.1 and the highest since April. Growth has now been registered for 16 consecutive months.

The upturn in operating conditions stemmed primarily from strengthened growth in output and new orders. Panelists reported that customer demand was improving, leading to higher volumes of new work (and subsequently production). Output and new orders both rose by the highest levels in eight months.

December’s survey indicated that demand improved from both domestic and international sources. New export business rose at a solid rate that was little changed from November’s seven-month high.

December’s survey data also indicated that average input costs paid by Vietnamese manufacturers continued to fall. Companies reported that supplier prices, shipping costs, and the price of fuel had all fallen when compared to November.

Average input prices declined by the greatest degree since July 2012. With a reduction in input costs, manufacturers chose to lower their average prices charged in December. Competitive pressures and efforts to stimulate demand also led to the sharpest fall in output charges for a year and a half.

Ms. Trinh Nguyen, Asia Economist at HSBC, said that the acceleration of Vietnam’s manufacturing activity stood in significant contrast to decelerating momentum elsewhere. Demand for Vietnamese goods rose, both externally and domestically. “We believe that the manufacturing sector will benefit from both wage cost competitiveness and lower input prices, thanks to declining global Brent costs,” she said. “We expect output to continue to expand in coming months, with some seasonal slowdown due to the Lunar New Year.”

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