Vietnam: Manufacturing sector ends the year on high note, despite dip in manufacturing PMI in December
January 2, 2019
According to data released by Nikkei and IHS Markit, the manufacturing Purchasing Managers’ Index (PMI) dipped to 53.8 points in December from November’s robust 56.5-point multi-year high. The index thus remained above the critical 50-point threshold that separates expansion from contraction in manufacturing output.
Despite softer expansions in output and new orders, December’s result rounded off a solid performance for the manufacturing sector in 2018, as growth rates for production, new business inflows and employment remained above their respective long-term averages. Sustained strength in output and new orders put pressure on manufacturers’ capacity and backlogs of work rose for the second consecutive month. Subsequently, firms increased hiring activity and continued to build up inventories in preparation for future growth. Moreover, new export orders also expanded at a strong pace in December.
On the price front, input prices fell in December for the first time in nearly three years. Firms’ anecdotes suggest lower costs for oil and paper were largely responsible for the drop. In response, firms reduced their selling prices by the greatest extent in nearly three years.
Finally, business confidence in the outlook remained elevated in December, albeit down slightly from November.
Commenting on the manufacturing sector’s final performance of 2018, Andrew Harker, associate director at IHS Markit noted:
“2018 as a whole was the best calendar year for the sector since the PMI survey began in 2011 and leaves the industry well placed to have a positive 2019 despite headwinds elsewhere in the global economy”.
Vietnam Fixed Investment Forecast
FocusEconomics Consensus Forecast panelists see fixed investment growing 8.5% in 2019, which is unchanged from last month’s forecast. For 2020, the panel estimates fixed investment growth will moderate to 8.0%.
Author: Lindsey Ice, Economist