Vietnam Manufacturing PMI keeps growth momentum in third quarter

The nation’s PMI declined to 52.5 in September from 52.7 recorded in the previous month, but still pointed to a solid improvement in terms of business conditions across the sector, S&P Global said in its PMI report for the country released on October 3.

This marked the 12th consecutive month that operating conditions have strengthened on the back of the COVID-19 pandemic being brought under control across the country, according to the report based on the results of a survey conducted by S&P Global during the second half of September.

The financial company noted new orders continued to rise, thereby fueling growth of output, employment, and purchasing activities. The current sequence of new order growth also extended to a year as new business expanded solidly in September amid reports of improving customer demand, though the rate of increase softened from August.

With new orders continuing to increase, manufacturers have moved to expand their production in a solid manner. The rate of growth was broadly in line with that seen in the previous month. Similarly, employment and purchasing activities each rose solidly again at the end of the third quarter.

As well as responding to higher production requirements, firms also made efforts to increase staffing levels as a means of supporting new production lines. Capacity expansions enabled firms stay on top of workloads despite ongoing new order growth, as can be seen by the second successive reduction in backlogs of work.

Similar to the situation in August, inflationary pressure continued to ease in September following the Government’s decision to lower retail petrol and oil prices, helping manufacturers to reduce cost burdens, although there are still some reports of higher raw material prices.

Meanwhile, the delivery times of suppliers have changed little following an improvement recorded in vendor performance in the previous survey period. This represented a much improved picture compared to earlier in the year. Renewed inventory building was signaled across the manufacturing sector in September. Furthermore, stocks of purchases increased for the first time in six months, linked to rising new orders and fuelled by higher purchasing activity.

Similarly, stocks of finished goods increased for the first time since February and to their greatest extent in close to a year-and-a-half. Some respondents in the S&P Global survey indicated that finished goods inventories had risen due to sales volumes coming in below expectations during the month.

“The Vietnamese manufacturing sector continued to tick along nicely at the end of the third quarter, with the PMI now having signaled overall expansion throughout the past year. A much more benign price and supply environment is providing support, while demand also improved again in September,” said Andrew Harker, economics director at S&P Global Market Intelligence.

The executive went on to say, “There were some tentative signs of new order growth slowing, however, particularly with regards to exports. This was a factor in a renewed expansion in stocks of finished goods as some firms sold fewer items than expected. This may lead manufacturers to limit production growth in October, but business confidence remained strong and so the prospects for the final three months of the year appear positive overall.”

According to S&P Global’s expectations, hopes for improvements in market demand and new orders, alongside confidence that the COVID-19 pandemic will remain under control, support optimism in the outlook for production for the year ahead. As a result of this positivity, sentiment has strengthened to its highest level in four months during September, standing above the series average.