Latest Nikkei Vietnam Manufacturing Purchasing Managers' Index puts Vietnam well ahead of its ASEAN peers.

The headline Nikkei Vietnam Manufacturing Purchasing Managers’ Index (PMI) strengthened to 53.3 in September from 51.8 in August, driven by faster rises in output, new orders, and employment on the back of stronger customer demand.

The end of the third quarter saw an improvement in growth momentum at Vietnamese manufacturing firms, with the reading putting Vietnam at the top among its ASEAN peers, leaving the runners-up far behind with indicators standing at below 51.

Anecdotal evidence highlighted an improvement in customer demand over the month. 

This resulted in a sharp and accelerated increase in new business, the most marked in five months, with the rate of expansion in new export orders also quickening in September, the report noted. 

Manufacturing output increased for the eleventh successive month, with the latest rise the most marked since April. 

All three broad sectors saw production increase, led by consumer goods firms.

Higher new orders contributed to capacity pressures, as signaled by a further rise in backlogs of work. 

Some panelists also reportedly mentioned that staff shortages contributed to the build-up of outstanding business. 

Firms responded to greater workloads by increasing their staffing levels. Moreover, the rate of job creation quickened to a six-month high.

Manufacturers also used inventories to help fulfill new orders in September. 

As a result, stocks of finished goods decreased for the third month running and to the greatest extent since July 2016. 

A marked acceleration in the rate of input cost inflation was recorded, linked to higher prices for raw materials, including those sourced from China.

The increase in input costs was the strongest since May 2011. 

Rising input prices led firms to increase their output charges in September for the first time in five months. 

That said, the rate of inflation was modest amid reports of competitive pressures.

Higher new orders, and a subsequent rise in production requirements, encouraged firms to increase their purchasing activity at the end of the third quarter. 

Manufacturers remained optimistic that output will increase over the coming year, with positive sentiment linked to predictions of new order growth and business expansion plans, according to the report.

“The third quarter of the year ended on a positive note for Vietnamese manufacturers as improving client demand breathed fresh life into the sector,” said Mr. Andrew Harker, Associate Director at IHS Markit, which compiles the survey. 

“New orders rose markedly, feeding through to faster expansion of output, employment, and purchasing activity. Manufacturers are, therefore, well placed to record further growth during the final quarter.”

“A cautionary note, though, is signaled by a reemergence of inflationary pressures,” he added. 

“Cost inflation was the strongest in over six years amid pressure on the supply of raw materials.”

VN Economic Times