PMI rebounds to a positive end at 52.5 in December, proving business sentiment up

Both employment and purchasing activity also increased at sharper rates, and business sentiment improved.

The Nikkei Vietnam Manufacturing Purchasing Managers' Index, or PMI, a composite single-figure indicator of manufacturing performance, rose to a three-month high of 52.5 in December, from 51.4 in November.

The reading signalled a solid monthly improvement in the health of the sector at the end of 2017. Business conditions have now strengthened in each of the past 25 months. 

One factor leading to the improvement in operating conditions was a return to growth of production.The modest increase in output in December followed broadly unchanged production volumes in November. 

Those respondents that raised output linked this to stronger market demand and higher new orders. Improved customer demand resulted in a solid rise in new orders, the fastest in three months. New business from abroad also increased at a solid and accelerated pace during December. 

Improving client demand also helped to support optimism that output will increase over the coming 12 months. Business sentiment improved to a nine month high in December. 

There remained evidence of spare capacity in the sector at the end of the year, linked to a recent period in which new order growth had eased. Backlogs of work decreased for the second month running, albeit modestly and at a slower pace than in November.

“The Vietnamese manufacturing sector recorded a welcome return to growth of output in December, supported by a solid and accelerated increase in new orders. This is welcome news following a slowdown in recent months," Andrew Harker, Associate Director at IHS Markit, which compiles the survey said. 

“Overall, 2017 has been a positive year for the sector, with the average PMI reading the highest since the survey began in 2011. Industry in Vietnam therefore looks to be in good shape heading into 2018,” he said.