Vietnam: Manufacturing sector gains traction in March
According to data released by Nikkei and IHS Markit, the manufacturing Purchasing Managers’ Index (PMI) ticked up to 51.9 points in March from February’s 35-month low of 51.2 points. As a result, the index remained above the critical 50-point threshold that separates expansion from contraction in manufacturing output, where it has been for forty consecutive months.
The improvement in manufacturing conditions in March was driven by higher production, which rose at the strongest rate since November 2018. Moreover, new business inflows accelerated to a three-month high, and new export orders also picked up in the month. Meanwhile, firms reduced outstanding business in March, however only marginally. To meet higher demand, firms ramped up purchasing activity notably, but input inventories were nonetheless depleted to meet production requirements. On the downside, employment fell again in March, although anecdotes from panelists suggest this was in part due to employee resignations, while some firms reported difficulties expanding their workforce. Meanwhile, suppliers’ delivery times shortened for the first time in over two years in March.
Turning to prices, inflationary pressures remained relatively mild in March, with input cost inflation rising only slightly. Given softer price pressures, firms were able to extend price discount offers, and output prices fell for the fourth month running.
Finally, business confidence was strong in March, with half of all survey respondents expecting higher output in the year ahead. Their more optimistic outlook was partly attributed to improved market demand and investment in production capacity.
Commenting on March’s results, Andrew Harker, associate director at IHS Markit, stated:
“While still some way short of the strong growth rates recorded last year, the manufacturing PMI data for March suggest that Vietnamese firms have weathered the recent slowdown in global trade and were able to continue to secure greater new order volumes and expand production.”