The Hanoitimes - According to report of Nikkei, the Vietnamese manufacturing sector experienced a positive end to 2017, with December seeing a return to growth of output amid a solid expansion of new orders.
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.
Both employment and purchasing activity also increased at sharper rates, and business sentiment improved. Meanwhile, rates of inflation of both input costs and output prices were broadly in line with those recorded in November. The Vietnam ‘s Nikkei Manufacturing Purchasing Managers’ Index (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.
Vietnam's PMI rose to a three-month high of 52.5 in December.
The reading signaled 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.
Rising output requirements contributed to a twenty first consecutive monthly rise in employment at Vietnamese manufacturers. The rate of job creation was solid, and the sharpest since September. Efforts to expand output also fed through to higher input buying during the month. Moreover, the marked expansion in purchasing activity was the fastest since April. Stocks of purchases were broadly unchanged, following a fall in November. Higher costs for raw materials such as oil and steel, as well as increases in prices from Chinese suppliers, resulted in a further sharp rise in input costs during December.
The rate of inflation was little-changed from that seen in November. This was also the case with output prices, which increased modestly. Suppliers’ delivery times lengthened again in December, with panelists largely attributing delivery delays to raw material shortages. Lead times have now lengthened in 11 successive months. Finally, stocks of finished goods decreased. Panelists often reported that goods had been produced directly for sale rather than to increase inventory levels.
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.