Vietnam: Manufacturing PMI ticks up in July, continues to signal robust growth in the sector
August 1, 2019
According to data released by Nikkei and IHS Markit, the manufacturing Purchasing Managers’ Index (PMI) inched up from 52.5 in June to 52.6 in July. As a result, the index moved further above the critical 50-point threshold that separates expansion from contraction in manufacturing output. The PMI reading looks particularly positive when compared to regional peers—the PMIs for ASEAN as a whole, China and Korea are currently in contractionary territory for instance—and is a testament to Vietnam’s attractiveness as a base for producers of cheap manufactured goods.
July’s uptick came on the back of faster growth in new orders and output. However, growth in new export orders weakened to an over three-year low amid U.S-China trade tensions, while job growth softened. Input price inflation was modest, while output prices continued to decline.
According to Andrew Harker, Associate Director at IHS Markit: “If anything, firms are not currently able to expand output quickly enough, as evidenced by a second successive rise in backlogs of work. Should the PMI remain around the current level for the rest of the quarter, PMI-based estimates suggest that manufacturing output will be set for further double-digit year-on-year growth in the third quarter of 2019.”
Author: Oliver Reynolds, Economist