Manufacturing continues to remain strong: S&P Global

The S&P Global Vietnam Manufacturing Purchasing Managers’ Index (PMI) stood at 52.5 in September, lower than the reading of 52.7 in August but still pointing to an improvement in business conditions across the sector.

A PMI reading of above 50 indicates an expansion of the manufacturing sector compared to the previous month, while one below 50 represents a contraction. The index is compiled by S&P Global from responses to questionnaires sent to purchasing managers at around 400 manufacturers.

"The Vietnamese manufacturing sector continued to tick along nicely at the end of the third quarter, with the PMI now having signaled overall expansion throughout the past year," Andrew Harker, economics director at S&P Global Market Intelligence, was quoted as saying in a release by the firm on Oct. 3.

"A much more benign price and supply environment is providing support, while demand also improved again in September."

Operating conditions have now strengthened in each of the past 12 months, according to S&P Global Market Intelligence.

Likewise, the sequence of new order growth also extended to a year amid reports of improving consumer demand.

With regard to new export orders, some respondents mentioned signs of demand weakness in export markets. The rise in new business from abroad was the slowest in 10 months.

But with total new orders continuing to increase, manufacturers expanded their production in September at broadly the same rate as in the previous month.

Employment and purchasing activity too rose as firms increased staffing levels to support new production lines.

Just like in August, cost pressures were relatively subdued in September, with inflation much lower than seen earlier in the year.

A number of respondents indicated that lower oil prices had helped them reduce their cost burden although according to S&P Global Market Intelligence there were still some reports of higher raw material prices.

Data released by the General Statistics Office of Vietnam showed that inflation increased 2.73% in the first 9 months of this year from the same periods last year.

To curb inflation, the government has sought to regulate prices of certain items such as petroleum and electricity.

With new order growth possibly slowing, particularly exports, manufacturers could limit production in October, "but business confidence remained strong and so the prospects for the final three months of the year appear positive overall," Harker said.