Vietnam: Manufacturing PMI drops in July
August 1, 2018
Vietnam’s manufacturing sector lost pace in July, as reflected by a drop in the Nikkei Purchasing Managers’ Index (PMI) reported by IHS Markit, which fell from 55.7 in June to 54.9. Nevertheless, the indicator remained above the critical 50-point threshold that separates expansion from contraction in manufacturing output and reflected improved business conditions in the sector, making thirty-two consecutive months of expansion.
July’s reading reflected a sharp rise in new orders at a near-record high pace amid accelerated export growth. Firms responded to the upturn in new orders by raising output. The increase in output was sufficient to marginally cut backlogs of work for the second month running. Firms responded to the expansion in new business by raising their staff in-take, with the rate of job creation remaining solid, albeit easing from June’s record-high. On the price front, input prices climbed again, with price increases being linked to shortages in raw materials. Firms raised output prices to pass on the burden of cost-adjustment on to consumers. Business confidence picked up from the previous month, with projections that new business will continue to rise over the next 12 months, fueling greater optimism that output will continue to grow.
Commenting on the prospects for Vietnam’s manufacturing sector, Andrew Harker, Associate Director at IHS Markit, stated:
“Confidence in the future was meanwhile illustrated by efforts by firms to build inventory reserves in order to prepare for further production growth and further solid hiring.”