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Improvement in Vietnam’s PMI

Improvement in Vietnam’s PMI

Tuesday 12, 09 2023
August’s PMI reached 50.5 points, showing that Vietnam's manufacturing industry is growing as some signs of recovery in demand have helped both the number of new orders and output increase again.

A slight improvement in business conditions

According to a newly published report by S&P Global, Vietnam's manufacturing PMI in August increased to above 50 points for the first time in 6 months. With a result of 50.5 - up from 48.7 in July, it shows that business conditions in the manufacturing industry have improved slightly.

business conditions

"Vietnam's manufacturing sector grew in August as some signs of demand recovery helped both new orders and output rebound. Companies have also increased purchasing activity, but employment continued to decline slightly as businesses are hesitant to hire more staff amid weak demand. A rebound in prices was also recorded in the middle of the third quarter. Input costs increased for the first time in four months, while selling prices has shown signs of increasing for the first time since March," the report said.

The recovery in manufacturing sector health has reflected signs of improving demand. Manufacturers recorded the first increase in new orders in six months, while the number of new export orders also increased after a five-month decline. However, the growth rate is mild with some reports suggesting weak demand.

Vietnam’s PMI by S&P Global PMI

Likewise, manufacturing output recovered in August, ending a five-month decline. However, the growth rate is only mild. The recovery in output and new orders was most significant in the capital investment goods sector.

Amid the increase in new orders and production demands, companies have sharply increased purchasing activity. This is the first increase in six months and the most significant increase since September 2022. Since then, inventory of purchased goods has also increased, marking the second consecutive monthly increase.

Less positive employment situation

However, the employment situation was less positive as companies remained hesitant to hire more staff and as a result, the number of jobs fell for the sixth consecutive month. However, the rate of decrease was the weakest during this period and was only a slight decrease.

The continued decline in employment reflects underutilized production capacity in the industry, and the backlog of work fell for the eighth consecutive month. Companies also recorded an increase in finished goods inventories for the second consecutive month as there were some reports that weak demand had left finished goods unsold.

PMI employment index

August’s data showed a sharp increase in input prices, ending a three-month decline. It is said that the reason for the increase in input costs was due to increasing oil prices, while increasing food prices were also mentioned. Companies have also increased selling prices, although the increase is only slight. This is the first output price increase since March.

Supplier delivery times shortened for the eighth consecutive month as suppliers' inventories remained sufficient to fill orders, despite increased demand for input goods in August. Sales performance also improved sharply, although least significantly since May.

According to S&P Global, a temporary improvement in market demand helped lift business confidence midway through the third quarter as companies hoped the recovery would continue in the coming months. Optimism about the outlook for output over the next 12 months is the highest in five months, but remains below the index's average amid continuing concerns about demand.

Source: S&P Global, vietnambiz

Compiled by VietnamCredit

 

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