Vietnam manufacturing continues improving in June
The second quarter of the year saw solid growth that was broadly stable across the period and an improvement on the first quarter.
The headline Nikkei Vietnam Manufacturing Purchasing Managers' index (PMI) posted 52.5 in June, up from 52.0 in May and in line with the reading from April, indicating improvements in business conditions amid ongoing new order growth, according to Nikkei and IHS Markit.
A reading below the 50 neutral mark indicates no change from the previous month, while a reading below 50 indicates contractions and above 50 points to an expansion.
Vietnamese manufacturers continued to record solid growth of new orders in June, with the rate of expansion ticking up to a six-month high. Panelists linked the latest rise to the launch of new products and increased customer numbers. Less positive data was seen with regards to new export orders, which rose at the slowest pace since February. There were some reports that the US-China trade tensions had impacted negatively on export orders.
Higher new orders was the key factor leading to a 19th successive monthly rise in manufacturing production in Vietnam. The upturn in output was solid, and broadly in line with those seen during the rest of the second quarter. Continued marked new order growth led to a rise in backlogs of work in June, the first in 2019 so far. Firms responded to higher workloads by taking on extra staff, reversing the decline seen in May.
Alongside job creation, higher workloads also encouraged manufacturers to purchase additional inputs in June. Moreover, the rate of expansion was marked and the fastest in three months. Some panelists reported efforts to build inventory reserves. Higher input buying and shorter delivery times enabled firms to raise stocks of purchases for the third consecutive month.
On the other hand, stocks of finished goods decreased modestly for the second month in a row.
Input prices rose at a relatively modest pace in June, and one that was the softest in three months. Where input costs did rise, panelists reported higher market prices for items such as oil and gas. Relatively weak input cost inflation meant that manufacturers were able to lower their output prices again. Charges have now decreased in seven successive months, with the rate of decline broadly stable throughout the second quarter.
Although manufacturers remained optimistic that output will increase over the coming year, the level of confidence dropped sharply in June and was the lowest since February. Some panelists reported concerns regarding the US-China trade situation. Where growth was predicted, respondents linked optimism to planned business investment, new product launches and entry into new markets.
“The Vietnamese manufacturing sector continues to bob along nicely midway through 2019. The second quarter of the year saw solid growth that was broadly stable across the period and an improvement on the first quarter. Ongoing strength in demand encouraged firms to fill positions that had been vacated by resigning staff in May, leading to a return to job creation,” said Andrew Harker, associate director at IHS Markit, which compiles the survey.
"One concern outlined by some firms was the US-China trade issues, which contributed to a moderation of export growth and weaker business confidence,” he added.
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