The Vietnam Manufacturing Purchasing Managers' Index (PMI) rose above the 50.0 no-change mark at 52.1 again in October following a reading of 40.2 in September, signaling a renewed improvement in business conditions across the sector, thereby ending a  decline for four consecutive months, according to Nikkei and IHS Markit.

Production at Thai Minh Hi-tech Company in Thach That - Quoc Oai industrial cluster. Photo: Nguyen Nga

A reading below the 50 neutral marks indicates no change from the previous month, while a reading below 50 indicates contractions, and above 50 points means an expansion.

“The improving pandemic situation and subsequent loosening restrictions helped Vietnamese manufacturers get back to business in October, according to the latest PMI survey. As well as being able to ramp up production, firms were also much more confident in the outlook than they have been in recent months,” said Andrew Harker, economic director at IHS Markit.

"That said, there are still some lingering issues caused by the recent pandemic outbreak which could stifle growth. First, the problems with transportation and supply chains haven't gone away, making the sourcing and distribution of products challenging. Second, a number of firms are still waiting for workers to return from their hometowns where they went during the latest Covid-19 wave, meaning labor shortages were experienced in October. Hopefully, these challenges will start to ease as the sector continues to return to normal over the months to come," he said.

Meanwhile, input costs increased at the fastest pace since April 2011 and at one of the sharpest rates in the survey's history. Higher freight charges were widely reported, adding to the inflationary pressures caused by raw material shortages.

In response to increasing input costs, manufacturers raised their own selling prices at a marked pace that was the fastest in five months. Efforts to guard against likely future price rises encouraged firms to expand their input inventories for the third month running in October. This was facilitated by a strong return to growth of purchasing activity, which increased at a near-record pace.

The report also noted stocks of finished goods decreased marginally in October. Some firms saw inventories decline as finished products were used to help meet sales, while others noted that renewed production growth helped them to stabilize stocks.