Vietnam: Manufacturing PMI continues on upward trend in January
February 1, 2018
Vietnam’s manufacturing sector gained steam at the outset of January, evidenced by the Nikkei manufacturing Purchasing Managers’ Index (PMI), reported by IHS Markit. The index climbed to 53.4 points in January from 52.5 points in December, moving further up from the critical 50-point threshold that separates expansion from contraction in manufacturing output.
January’s improved result was underpinned by a more rapid rise in output, new orders and employment, which yielded the biggest improvement in business conditions since April 2017. Increased demand spurred an acceleration in new orders at the fastest rate in four months. Favorable demand abroad buoyed new business from overseas markets. Firms hired more workers in response to the expansion in new orders, with the job creation rate jumping to a 16-month high. Higher staffing levels enabled businesses to reduce added backlogs of work, which fell for the third consecutive month. Meanwhile, shortages of raw materials led to delays from suppliers and caused input costs to climb at the fastest rate in the survey’s history. This prompted firms to raise output prices, which rose at the swiftest pace in almost a year. Manufacturers have an optimistic outlook on demand for 2018 and expect higher investment to support growth in output.
Commenting on the outlook for the Vietnamese manufacturing sector, Andrew Harker, Associate Director, stated:
“With the TPP trade agreement also back on the agenda, there will be plenty of optimism that the sector will continue to grow as the year progresses. On a more cautionary note, inflationary pressures intensified, with input costs up at one of the sharpest rates in the survey’s history. This adds to evidence that strong growth globally is putting pressure on manufacturing supply chains and pushing up costs for raw materials.”
Author: Nihad Ahmed, Economist