The Hanoitimes - The Vietnam Manufacturing Purchasing Managers’ Index (PMI) increased from 51.8 in August to 53.3 in September, thanks to faster rises in output, new orders and employment on the back of stronger customer demand.
As such, this is seen as the best PMI score Vietnam has achieved in over 22 months. According to experts, new orders in Vietnam rose markedly, feeding through to faster expansion of output, employment and purchasing activity. Manufacturers are, therefore, well placed to record further growth during the final quarter. This is a significant increase in the last 5 months, while the rate of placing orders has been positive in September. With this being said, the inventory has decreased in 3 consecutive months, in which this is the largest decrease since July 2016.
The manufacturing output of Vietnam has also increased in 11 consecutive months, with improvements spread in all fields. With regard to input price, due to the increase price of materials, including materials imported from China, the input price has significantly increased, with the strongest increase rate recorded since May 2011. Therefore, in this September, for the first time in recent 5 months, companies have to increased their products price.
Among southeast Asian nations, Vietnam continues holding the top spot with PMI score of 53.3, while Philippines is in the second place with 50.8 points, despite a slightly increase in growth rate. Indonesia with 50.4 points shows its business conditions are improved. With Thailand is back on the recovery track scoring 50.3 points, which has previously dip in two months ago. After improvement from previous months, Malaysia (49.9 points) witnessed production conditions almost unchanged in September. Meanwhile, Singapore with PMI of 48.6 scores is one of the lowest score among other nations. Myanmar (49.4 points) continues with weak business conditions, despite a slow decreasing rate.
The PMI is an indicator of the economic health of the manufacturing sector. The PMI is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. The purpose of the PMI is to provide information about current business conditions to company decision makers, analysts and purchasing managers. A figure above 50 denotes expansion in business activity. Anything below 50 denotes contraction. Higher the difference from this mid-point greater the expansion or contraction. The rate of expansion can also be judged by comparing the PMI with that of the previous month data. If the figure is higher than the previous month's then the economy is expanding at a faster rate. If it is lower than the previous month then it is growing at a lower rate.
The PMI is usually released at the start of the month, much before most of the official data on industrial output, manufacturing and GDP growth becomes available. It is, therefore, considered a good leading indicator of economic activity. Economists consider the manufacturing growth measured by the PMI as a good indicator of industrial output, for which official statistics are released later. Central banks of many countries also use the index to help make decisions on interest rates.