Vietnam’s Nikkei-issued Purchasing Managers’ Index (PMI
), which gauges the country’s manufacturing performance, dipped to 51.7 in October from 52.9 in the previous month, signaling a modest improvement in business conditions that was the weakest since March.
The health of the sector has strengthened over the past 11 months in a row, Nikkei and HIS said in a report released Tuesday.
The improvement was driven by a further pick-up in new orders at Vietnamese manufacturers amid reports of rising client demand in both domestic and export markets, and a four-month high growth in total new business.
According to the report, despite a solid increase in new orders, firms saw production levels broadly stabilize, thereby ending a ten-month sequence of growth. Falls in output were seen in the intermediate and investment goods sectors, but consumer goods production increased.
Firms displayed a preference for inventory building in October, with stocks of purchases rising at the fastest pace in the survey’s history. “This accumulation was facilitated by a sharp and accelerated expansion of purchasing activity during the month,” said the report.
Stock of finished goods increased for the second month running and the growth was the fastest since May 2015.
“While output growth paused in the Vietnamese manufacturing sector during October, a number of other series from the latest PMI survey were broadly positive, suggesting that the stabilization of output may just be a temporary blip.
Firstly, new order growth picked up to a four-month high as firms reported improving client demand. In addition, firms ramped up their purchasing activity in order to support a record increase in stocks of purchases as manufacturers prepared for future production,” said Andrew Harker, at IHS Markit, which compiles the survey.
In the latest report, IHS Markit has revised up its forecast for Vietnam’s GDP
growth to 6.0% in 2016, up from projections of 5.85% released in September and 5.9% announced in October.