Business expansion drives Vietnam’s April PMI to nine month high

“This month's PMI showed an improvement for the fifth month in a row,” the report said. A reading above 50 indicates economic expansion, while a reading below 50 points toward contraction.

A key driver of the latest improvement in operating conditions was a solid expansion of new business. New export orders also continued to increase in April. Increasing new business contributed to a fifth consecutive monthly rise in manufacturing production, according to the report.

“The recent soft patch in the Vietnamese manufacturing sector appears to have come to an end according to latest PMI data which showed the strongest improvement in the health of the sector since July last year. Of particular note was a solid expansion in new orders,” said Andrew Harker at Markit, a research firm that compiled the survey.

The rise in employment followed a slight fall in the previous month and was the strongest since May 2015. Higher staffing levels enabled manufacturers in Vietnam to work through outstanding orders and complete projects. As a result, the backlog decreased for the first time in 2016.

Manufacturers, however, recorded a marked increase in input costs during April, with the rate of inflation rising to a high level. With input prices increasing, firms were forced to increase prices accordingly. Output price inflation was recorded for the first time in over a year-and-a-half, although the rise was only marginal.

Purchasing activity increased in April, with firms linking higher input buying to rising production requirements. Purchasing has now expanded in each of the past five months. Both stocks of purchases and finished goods continued to decrease, although in each case at slower rates than in the previous month. Inventories of both pre- and post-production goods have fallen throughout 2016 so far, the report said.