PMI drops to ten-month low but business confidence rebounds

By Hoai An - Oct 03, 2018 | 01:05 AM GMT+7

TheLEADERVietnam Manufacturing Purchasing Managers’ Index (PMI) in September shows the first reduction in output prices in 13 months, slower rises in output, new orders and employment but business confidence rebounded from August’s low.

According to Nikkei – IHS Market’s press releases, Vietnam’s PMI – a composite single-figure indicator of manufacturing performance – dropped to 51.5 in September from 53.7 in August.

The improvement rate in the health of manufacturing sector has eased in three successive months, with the latest strengthening of business conditions being the weakest since last November.

However, operating conditions have now improved in each of the past 34 months.

Central to the drop in the PMI figure during September were slower rises in both output and new orders. Manufacturing production rose at the weakest pace since March, with growth easing for the third month running.

New export orders rose modestly, and to the slowest extent in 16 months.

Manufacturing employment increased in September, but the rate of job creation was slight, having eased to the weakest since August 2017.

On a more positive note, business confidence rebounded from the record low seen in August. Company plans and expected growth of new orders supported optimism that output will increase over the coming year.

Although input prices continued to rise at the end of the third quarter, the rate of inflation slowed and was weaker than the series average. Weaker cost inflation enabled firms to reduce their output prices, ending a one-year period of increases.

According to respondents, efforts to secure sales amid competitive market conditions were behind the fall in charges.

Manufacturers continued to raise purchasing activity in line with higher new orders, but the rate of expansion softened to a six-month low. The rate of accumulation in stocks of purchases also slowed and was only fractional. Meanwhile, stocks of finished goods decreased for the first time in three months.

Commenting on Nikkei’s survey, Andrew Harker, Associate Director at IHS Markit said that: “As was the case throughout the third quarter of the year, growth in the Vietnamese manufacturing sector moderated during September. While remaining positive overall, demand conditions are clearly less buoyant than they were during the second quarter.”

“The rate of input cost inflation also continued to moderate, providing some room for firms to reduce selling prices to help secure new business. In fact, charges were lowered for the first time in over a year during September,” he said.