Should the PMI remain around the current level for the rest of the quarter, PMI-based estimates suggest that Vietnam’s manufacturing output will be set for further double-digit year-on-year growth in the third quarter of 2019, according to IHS Markit.
The analytics and solutions provider noted that the Vietnam Manufacturing Purchasing Managers’ Index (PMI) has ticked up to 52.6 in July from 52.5 in June.
Manufacturing production advanced sharply in July, with the rate of expansion quickening for the third month running to the fastest since last November. Firms, as IHS Markit surveyed, indicated that they were often able to follow production plans, with higher new orders also contributing to output growth.
New business rose at a solid pace and the fastest in 2019 so far amid improving customer demand.
Solid increases in new work added to pressure on capacity at Vietnamese manufacturers. Backlogs of work rose for the second month running. Firms responded to greater output requirements by taking on additional staff for the third time in four months. That said, the rate of job creation was only slight and weaker than that seen in June.
“Latest PMI data for Vietnam point to ongoing success for Vietnamese manufacturers during July, with new business growth the fastest in the year-to-date. This was despite the joint-weakest rise in exports for 44 months as the US-China trade dispute hampers global trade flows,” commented Andrew Harker, associate director at IHS Markit, adding that if it was not the case of the promising outlook of the manufacturing sector, firms would not be able to currently expand output quickly enough, as evidenced by a second successive rise in backlogs of work.
Meanwhile, input cost inflation has softened for the third successive month in July, with some firms citing China as a source of falling prices. The latest increase in input prices was only slight and the weakest since March.
Relatively soft cost pressures enabled manufacturers to maintain competitive pricing policies at the start of the third quarter, with selling prices reduced for the eighth month running.
Expectations of higher new orders over the next 12 months resulted in continued optimism among manufacturers that production will expand over the coming year.
Confidence in the near-term outlook, alongside increases in current workloads, encouraged firms to expand their purchasing activity in July.
“Should the PMI remain around the current level for the rest of the quarter, PMI-based estimates suggest that manufacturing output will be set for further double-digit year-on-year growth in the third quarter of 2019,” noted Harker.
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