Viet Nam’s PMI at four-month high as employment rises

A survey by Nikkei and IHS Markit released on Thursday also showed the country’s business conditions have improved on a monthly basis since December 2015.

According to the survey, Vietnamese firms continued to see rise in new orders at a solid pace in April, with the rate of growth broadly in line with that seen in March. A similar picture was seen with regards to new export business. In both cases, respondents mentioned improving customer demand.

“New order growth fed through to increases in a number of other variables monitored by the survey, including purchasing, employment and output,” the survey noted. “Manufacturing production rose for the 17th successive month. The rate of expansion was solid, albeit weaker than in the previous month.”

Job creation was registered for the first time in three months at the start of the second quarter. The increase in employment was slightly faster than the series average. Greater operating capacity meant that firms were able to keep on top of workloads in spite of a further solid expansion of new orders. As a result, backlogs of work decreased for the fourth month running.

“The main positive from the latest Viet Nam manufacturing PMI survey was a return to employment growth, the first rise in three months, as firms gained confidence that the soft patch at the start of the year is now a thing of the past,” said Andrew Harker, Associate Director at IHS Markit, which compiled the survey.

According to the survey, purchasing activity continued to rise solidly, with the latest increase helping to support the first accumulation in pre-production inventories since January. Stocks of finished goods also expanded, albeit only marginally and to the least extent in the current seven-month sequence of accumulation.

“New orders are predicted to increase further over the coming year, helping to boost sentiment around production volumes,” the survey said. “Business expansion plans are also set to support output growth. Sentiment rose to a three-month high in April.”

However, it noted, the rate of input cost inflation accelerated to the sharpest since last November. There were general increases in raw material prices on international markets. Despite a solid rise in cost burdens, manufacturers in Viet Nam continued to lower their output prices. Charges were reduced for the fifth consecutive month, linked to efforts to secure greater new order volumes. However, the rate of decline was only marginal.

Finally, suppliers’ delivery times were broadly unchanged in April. Higher demand for inputs led to delays from some suppliers, but respondents indicated that others were able to satisfy requests for quicker deliveries.

“There was still a reluctance to raise selling prices, however, in spite of a pick-up in the rate of cost inflation, but this will likely change should solid inflows of new work continue in coming months,” Harker said.