Vietnam factory activity still in contraction territory: S&P Global

Vietnam's Manufacturing Purchasing Managers' Index (PMI), which measures factory activity, dipped to 49.6 in October from 49.7 in September, still below the 50.0 no-change mark, as firms continued to scale back production despite modest improvements in new orders, said S&P Global.

The reading signaled a second consecutive monthly deterioration in the health of the sector. A reading of below the 50.0 neutral mark indicates contraction.

Central to the latest decline in business conditions was a further reduction in manufacturing output, the second in as many months. The latest fall was only slight as some firms increased production in line with new order growth.

New orders increased for the third month running amid some signs of improvement in customer demand. The rate of order growth was only marginal and the weakest in the current sequence of expansion.

Growth of new export orders also softened over the month, but remained more pronounced than that seen for total new business, S&P Global noted.

Purchasing activity continued to rise solidly, expanding for the third month running amid efforts to build reserves of inputs ahead of expected increases in production.

“PMI data for the start of the final quarter of the year painted a similar picture to that for the end of the third quarter. New orders continued to rise, but only at a modest pace and one which wasn't sufficient to encourage firms to expand their production. Instead, manufacturers were content to draw down inventories of finished products to satisfy demand,” Andrew Harker, economics director at S&P Global Market Intelligence, commented.

“There was some more positive news on the employment front as a seven-month period of job cutting came to an end. This, along with rising purchasing and positive sentiment, suggests that firms are becoming more confident that recent demand improvements will be sustained in the months ahead.

“The other noteworthy development in October was a further intensification of inflationary pressures, with higher oil prices and currency weakness pushing upinput costs,” Harker concluded.

Meanwhile, the government-run General Statistics Office reported on Sunday that Vietnam’s industrial production index continued on its road to recovery in October by rising 5.5% from September and 4.1% year-on-year.