Vietnam’s manufacturing sector stays strong despite dim prospects for trade deal

By VnExpress   February 3, 2017 | 12:01 pm GMT+7
Vietnam’s manufacturing sector stays strong despite dim prospects for trade deal
Men work at a steel mill in Hai Duong Province, Vietnam. Photo by Reuters

The sector still grew at the start of 2017 amid concerns that the Trans-Pacific Partnership will die after the U.S's withdrawal.

Vietnam’s manufacturing purchasing managers’ index fell to 51.9 in January from 52.4 the previous month.

It was the modest growth in the last three months of the Nikkei-Markit survey, but the manufacturing sector in Vietnam remained in expansionary territory and came second among the countries in Southeast Asia.

“It was a steady start to the year for the Vietnamese manufacturing sector with growth of output, new orders and employment maintained,” said Andrew Harker from IHS Markit.

New orders continued to grow in the first month of 2017, but the rise was also the slowest in a three-month period. There was also an increase in new export orders due to stronger demand from foreign customers.

Although the rate of job creation eased for the second-straight month, Vietnamese manufacturers still reported more jobs in January.

“Although rates of expansion generally slowed, the ability of firms to secure a further solid increase in new work bodes well for coming months,” said the Markit expert.

Business conditions have strengthened in each of the past 14 months and business sentiment remained strongly positive as firms generally expected increases in new orders and new product launches, according to the survey.

Given the fact that there will be highly likely no Trans-Pacific Partnership (TPP) under Donald Trump’s presidency, Vietnam, which is supposed to be among the biggest beneficiaries of the trade deal, may be viewed less attractive as an investment destination than it could have been. Trump officially pulled the U.S. out of the ambitious 12-nation pact right after taking office.

“This means that Vietnamese firms won’t see the benefits of the trade pact with the U.S. in the longer term in areas such as textiles and clothing analysts,” said Harker. "Despite this setback, the near-tem outlook remains positive."

The headline Nikkei Manufacturing Purchasing Managers’ Index, a composite single-figure indicator of the manufacturing sector, is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 industrial companies in Vietnam.

A reading above 50 indicates the manufacturing sector is the expansionary territory, while a reading below 50 points toward contraction.

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