The headline Nikkei Vietnam Manufacturing Purchasing Managers’ Index (PMI
), which measures manufacturing performance, rose slightly to 52.7 in May from 52.3 in April, signaling a solid monthly improvement in the health of the sector.
Central to the latest strengthening of operating conditions was a marked rise in new business. The growth rate picked up to the sharpest in 12 months and was among the fastest in the survey’s history, says the report, adding new export orders also rose, albeit at a weaker pace than in April.
Higher new orders led to a further expansion of manufacturing production, the sixth in as many months. Moreover, the latest rise was the sharpest since July last year.
In response to higher new orders, manufacturers took on extra staff and increased their purchasing activity. Employment rose for the second month running, albeit only slightly and at a slower pace than in April.
The rate of growth in input buying, meanwhile, accelerated and was the sharpest since last July. Purchasing has now increased in each of the past six months.
Rising input buying contributed to an accumulation of stocks of purchases, the first in five months. On the other hand, stocks of finished goods decreased as products were delivered to clients.
The rate of input cost inflation quickened for the second month running in May and was the fastest since August 2014. Respondents indicated higher costs for raw materials, in some cases linked to a lack of supply.
With input prices continuing to rise, manufacturers increased their output prices. Although faster than in April, the rate of charge inflation remained slight, the report notes.
“The latest set of PMI data for Vietnam paints an encouraging picture of the health of the manufacturing sector. The strength of new order growth is the highlight from May’s release and should help lead to further improvements in output and employment in coming months,” said Andrew Harker at Markit, which compiles the survey.
“It is becoming clearer that the recent period of deflationary pressure has come to an end, but Vietnamese firms have so far been able to restrict the extent to which they have raised their output prices. This could change should the rate of cost inflation continue to build,” he added.