PMI above 50, new export orders increase

On the morning of September 4, S&P Global released the Vietnam Manufacturing Purchasing Managers’ Index (PMI) report. There were three highlights: output and new orders continued to increase significantly; inflationary pressures eased and employment fell for the first time in three months.

S&P Global assessed that Vietnamese manufacturers continued to report increases in output and new orders at the midpoint of the third quarter. Although growth in each of these indicators slowed from July’s near-record levels, the rate of expansion was still strong and led to the most significant increase in purchasing activity in more than two years.

On a less positive note, however, employment fell for the first time in three months. Although both input costs and output prices continued to rise in August, reports on competitive pressures showed that the rate of price and cost increases slowed markedly during the month.

The improvement in the health of the manufacturing sector saw output and new orders continue to rise, and the respective rates of increase remained rapid although they eased from the exceptionally high rates recorded in June and July.

Improved customer demand led to a rise in new orders, and firms increased output accordingly. In some cases, relative price stability helped firms secure new orders, while there were also some reports of improving international demand. New export orders rose for the fifth month in a row.

The report said that relative price stability was also reflected in input cost and selling price data. While both continued to rise, the rate of increase slowed significantly from July and was the weakest in four months.

Some manufacturers reported rising raw material prices, but the pace of price increases has slowed amid competitive pressure. Meanwhile, lower oil prices have reduced transportation costs in some cases.

A sharp rise in new orders and easing cost pressures prompted manufacturers to increase purchasing activity sharply in August. Notably, the rate of increase accelerated for the fourth consecutive month and was the quickest since May 2022.

Another positive is that purchased inputs are often used directly in production, which further reduces purchased inventories. Finished goods inventories also decrease as finished goods inventories are shipped to customers to meet order requirements.

Vietnam's manufacturing sector scored 52.4 points in August, down from 54.7 points in July but still showing strong improvement. Photo: VNA

In contrast to purchasing activity, manufacturers reduced employment for the first time in three months as layoffs and temporary terminations emerged. The fall in the workforce came at a time of rising new orders, causing backlogs of work to rise further in August.

Supplier delivery times shortened for the third month running, although the reduction was small amid some reports of delays in international shipments. Manufacturers remain optimistic that output will increase next year, on expectations of continued improvement in customer demand and rising new orders.

Commenting on Vietnam's manufacturing sector in August, Andrew Harker, Chief Economist at S&P Global Market Intelligence, said: "As expected, Vietnam's manufacturing output and new orders grew more slowly than the exceptionally high levels recorded in June and July. These increases are always difficult to sustain, and the pace of growth remains substantial, so there is little cause for concern on this front."

The positive point lies in the inflation-related factor when both input costs and output prices increased much weaker in August. In fact, this is considered a factor contributing to the number of new orders maintaining the increase.

"Overall, manufacturing continues to have a strong second half so far, with much to work out in the coming months," said economist at S&P Global Market Intelligence.

Source: https://congthuong.vn/thang-82024-pmi-tren-nguong-50-diem-luong-don-dat-hang-xuat-khau-moi-tang-343302.html