Vietnam manufacturing activity contracts in Sep: S&P Global

Vietnam Manufacturing Purchasing Managers' Index (PMI), which measures factory activity, posted 49.7 in September, back below the 50.0 no-change mark following an improvement to 50.5 in August on weaker production, S&P Global has said.

The index thereby signaled a deterioration in business conditions for Vietnamese manufacturers, albeit one that was only marginal, S&P Global said in its monthly note released Monday.

S&P Global pointed out the most positive aspect of the latest survey was a second successive monthly increase in new orders, with the rate of expansion broadly in line with that seen in the previous survey period.

A number of respondents signaled that strength in new export orders, particularly from other Asian economies, had helped to boost total new business.

Despite the continued pick-up in demand, manufacturers suggested that new order receipts remained relatively modest, leading to a scaling back of production. Output was slid following August's rise, with production now having fallen in six of the past seven months.

Rates of inflation gathered pace, with both input costs and output prices rising more quickly at the end of the third quarter. The rate of input cost inflation reached a seven-month high while output prices rose for the second month running.

“The picture was mixed in the Vietnamese manufacturing sector during September. On a positive note, firms continued to see demand pick up, with a particularlyencouraging rise in new orders signaled. This fed through to greater confidence in the year-ahead outlook,” said Andrew Harker, economics director at S&P Global Market Intelligence.

“On the other hand, there is clearly still some excess capacity in the sector, which meant that firms continued to lower employment and also scaled back output slightly, opting to use the inventories that had been building up in recent months to help meet new orders.

“The sector is therefore at something of a crossroads. Should demand continue to pick up, this should feed through to growth across the sector. If the recoveryin new orders loses steam, however, firms will remain reluctant to expand capacity too quickly,” Harker commented.

Meanwhile, the government-run General Statistics Office reported last Friday that Vietnam’s industrial production index in September edged up 0.1% from August and 5.1% year-on-year.