Vietnam manufacturing activity rebounds, recovering from typhoon Yagi

The Vietnamese manufacturing sector in October started to recover from the effects of September's super typhoon, recording renewed increases in both output and new orders.

The S&P Global Vietnam Manufacturing Purchasing Managers' Index (PMI) posted 51.2 in October, up from 47.3 in September and back above the 50.0 no-change mark following the disruption caused to the sector by typhoon Yagi last month.

Business conditions have now strengthened in six of the past seven months, although the improvement in October was only modest, according to the market intelligence company.

Both production and new orders in the sector returned to growth as the recovery from the typhoon got underway. In each case, however, expansion rates were softer than in the months leading up to September as some firms continued to face disruption following the storm and associated flooding.

Alongside the rise in total new business, new export orders also increased in October. Manufacturers continued to use stocks of finished goods to help fulfil orders at a time when production was partly hampered.

Meanwhile, employment ticked down, reversing the rise seen in the previous month.

Purchasing activity returned to growth amid higher new orders and expected increases in production in the months ahead. Stocks of purchases continued to fall as inputs were used to support the growth of production.

Manufacturers reported a rise in input costs amid currency weakness and higher prices for oil, metals, and transportation. In turn, firms increased their own selling prices. However, the rate of charge inflation was only slight as some respondents indicated that competitive pressures had led them to offer discounts.

Rising sales, hopes for stable market conditions and business expansion plans all contributed to positive expectations regarding manufacturing production over the coming year. That said, optimism dipped to a nine-month low and was weaker than the series average.

Andrew Harker, economics director at S&P Global Market Intelligence, said: “October data showed that the recovery from the disruption caused by typhoon Yagi got underway during the month, with firms seeing a rise in new orders andbeing able to expand their production.

“Some companies are still suffering from the effects of the storm, however, limiting rates of expansion. We should hopefully, therefore, see growth pick-up as more manufacturers get back up to full capacity towards the year end."

Vietnam’s index of industrial production (IIP) grew 8.6% year-on-year in January-September, extending the recovery of the sector, but the September index fell 0.2% from August, according to the General Statistics Office (GSO).