Illustrative photo (Photo: VNA) HoChi Minh City (VNA) – Vietnam's manufacturing sectorreturned to growth in August as some signs of recovery in demand supportedrenewed increases in both new orders and production, according to the S&PGlobal Vietnam Manufacturing Purchasing Managers' Index™ (PMI).
The PMI moved back above the 50.0 mark for the first time in six months during August. At 50.5, the index was up from 48.7 in July and pointed to a marginal monthly improvement in business conditions in the sector.
Firms expanded their purchasing activity accordingly, butemployment continued to fall marginally as firms were reluctant to take onextra staff given still fragile demand.
Renewed increases in prices were also recorded midwaythrough the third quarter. Input costs rose for the first time in four months,while selling price inflation was signaled for the first time since March.
Accordingto S&P Global, the nascent recovery in the health of the sector reflectedtentative signs of demand improving.
Manufacturers recorded a first increase in new orders forsix months, while new export business also rose following a five-month sequenceof decline. Growth rates were modest, however, amid some reports of ongoingdemand fragility.
Similarly, manufacturing production returned to growth inAugust, ending a five-month period of falling output. However, the rate of increasewas only marginal.
Recoveries in output and new orders were most keenly felt inthe investment goods category.
Firms responded to higher new orders and greater outputrequirements by expanding their purchasing activity at a solid pace. The risewas the first in six months and most pronounced since last September. In turn,stocks of purchases also increased, the second month running in which this hasbeen the case.
The picture for employment was less positive, however, with row.That said, the pace of reduction was the weakest in this sequence and onlymarginal.
Ongoing reductions in employment reflected continued signsof spare capacity in the sector, with backlogs of work decreasing for theeighth consecutive month.
Firms also recorded a build-up of stocks of finished goodsfor the second month running amid some reports that weak demand had leftfinished products unsold.
August data pointed to a solid increase in input prices,thereby ending a three-month period of decline. A number of panellists linkedhigher input costs to rising oil prices, while increased food prices were alsomentioned. In turn, firms also raised their own selling prices, albeit onlyslightly. The increase in charges was the first since March.
Suppliers' delivery times shortened for the eighthsuccessive month as stocks at suppliers remained sufficient to deal with ordersdespite a pick-up in demand for inputs during August. The improvement in vendorperformance was solid, albeit the least marked since May.
Tentative improvements in market demand helped to strengthenbusiness confidence midway through the third quarter, with firms hoping for acontinued recovery in the months ahead. Optimism in the 12-month outlook forproduction was the highest in five months, but still below the series averageamid ongoing concerns around the strength of demand.
Andrew Harker, economics director at S&P Global MarketIntelligence, said that the latest S&P Global Vietnam Manufacturing PMIpaints a more encouraging picture regarding the health of the sector than hadbeen the case in recent months, with output, new orders, exports and purchasingall returning to growth.
Improvements were generally still quite muted, however, asdemand conditions remained fragile. It is probably too early to say, therefore,that the sector is in full recovery mode.
Another key aspect from the latest survey was the end of therecent period of falling prices, with both input costs and selling charges upin August, often linked to higher oil prices, he said./.
