New Orders of Vietnam's Manufacturing Sector Sharply Increase

The report showed that growth in the manufacturing sector of Vietnam had regained its impetus at the end of the first quarter of 2014. Both output and new orders rose at a faster pace than that of the previous month and the number of new export orders rebounded. However, employment fell for the first time since June 2013.

 

Meanwhile, the cost growth rate slowed down and companies lowered selling prices.

 

Full PMI is seasonally adjusted, a composite indicator designed to be an overview of the operating conditions of the manufacturing industry, reaching 51.3 points in March which showed a moderate improvement in business conditions. The index rose slightly from 51 points in February and noted improvement in operating conditions for seven consecutive months.

 

March is witnessing the strongest increase in five months of the number of new orders. Members of the survey team said that there had been general improvement in demand in the manufacturing sector. The number of new export orders also rose in March after a slight decrease in the previous month.

 

The increase in the number of new orders helped manufacturing companies increase their production output during the six months. Moreover, the growth rate is faster than that of the previous month.

 

Increased productivity has helped companies resolve the backlog of work. The amount of backlog has decreased in the past five months; the rate of decline in this month is the slowest.

 

That production requirements increase has made companies increase purchasing activities. Input purchasing activities rose for seven consecutive months with a fast pace which is only a little slower than the record noted in January. Despite this, buying inventory continued to decline slightly as input goods are consumed in the production process. Inventory of finished goods also fell sharply when some members of the survey team said that finished goods are kept in stock and not delivered to customers.

 

Employment at manufacturing companies of Vietnam has been reduced in March, thereby ending the period of job creation which lasted seven months. However, the rate of job decline is small. The members of the survey teams said that the main reason leading to the reduction of employees is that they had left to find jobs elsewhere.

 

The growth rate in input costs has slowed down during the past three months and is weaker than the average level in the history surveys. Despite the fact that shortages of materials makes suppliers raise prices, and the decline in commodity prices in the world market is said to slow down price increase momentum. In spite of the fact that input costs continue to rise, in March, producers have decreased output prices under the pressure of strong competition as stated in some reports.

Delivery time of providers remains virtually unchanged in March, after being stabilized in the previous month. Improved performance of sales people is thanks to the fact that companies are required to deliver goods faster. On the other hand, the shortage of raw materials has led to some cases of late delivery.

 

Commenting on the manufacturing sector PMI survey of Vietnam, Ms Trinh Nguyen, economist of the HSBC, said: "The increase in output of the manufacturing sector reflects the outstanding achievements of Vietnam in exports, especially exports to partners in regions where the stagnation of China has reduced demand. We expect that the manufacturing sector will continue to benefit from increased foreign investment in production, decreased input costs and improved demand in Western countries. The decreased employment status and input costs reflect bottlenecks in the economy: an imbalance between demand and supply of skilled labours and slow speed of the reform of financial sector, thereby reducing consumer demand and price pressures."