Vietnam: Manufacturing PMI declines in August
September 4, 2018
Vietnam’s manufacturing sector lost steam for the second consecutive month, as reflected by a fall in the Nikkei Purchasing Managers’ Index (PMI) reported by IHS Markit. The PMI dropped from 54.9 in July to 53.7 in August, moving further up from the critical 50-point threshold that separates expansion from contraction in manufacturing output and reflects improved business conditions in the private sector. August’s print marks thirty-three consecutive months of expansion.
The drop in the PMI reflected sharp but slower expansions in output and new orders in August. Orders from overseas markets also rose but to a lesser extent than total new business. Strong growth in new orders powered a solid rise in manufacturing production. Firms continued to hire more workers, although the rate of employment generation weakened from June’s record high. On the price front, input prices increased owing to the combined effects of higher raw material prices and a depreciation of the Vietnamese dong against the U.S. dollar. Firms raised their output prices in response, although the rate of inflation eased to a three-month low amid competitive pressures. Manufacturers were markedly less optimistic, however, with confidence among firms dropping to the lowest level since the survey began in April 2012. Positive sentiment among respondents reflected expectations of higher demand and increased new orders.
Commenting on August’s PMI data, Andrew Harker, Associate Director at IHS Markit, stated:
“Although seeing a slowdown in growth of output in August, the Vietnamese manufacturing sector appears to be on a sound footing at present thanks to an ability to continue to secure strong inflows of new work. That said, business confidence dropped the lowest since the series began in early-2012 suggesting that concerns around global trade flows may start to impact Vietnamese firms over the coming months”
Author: Nihad Ahmed, Economist