Econ
Vietnamese manufacturing sector remains in a softer growth phase in February
Although remaining above the 50.0 no-change mark, the index has now fallen for three months in a row. The latest month saw a continued lack of inflationary pressure in the sector.
The headline Nikkei Vietnam Manufacturing Purchasing Managers' index (PMI) posted 51.2 in February, down from 51.9 in January and was the lowest since March 2016.
Although remaining above the 50.0 no-change mark, the index has now fallen for three months in a row. The latest month saw a continued lack of inflationary pressure in the sector.
While both output and new orders rose at sharper rates in February, the headline index was pulled down by reductions in employment and stocks of purchases.
The decline in staffing levels was the first in almost three years as manufacturers responded to relatively weak new order growth in recent months. The reduction represented a marked turnaround from a record pace of job creation in November 2018.
Although new orders continued to rise, and at a faster pace than in January, the latest expansion was much slower than those seen towards the end of 2018. The rate of expansion in new export orders, meanwhile, eased to a 37-month low.
Production growth quickened in February and was solid, but the latest rise was below the average seen across 2018. Where output increased, panelists reported that customer demand had improved.
Despite cutting back on staffing levels, Vietnamese manufacturers were again able to reduce their backlogs of work as new order growth remained relatively weak. In fact, outstanding business decreased to the greatest extent in almost a year.
Stocks of purchases fell for the first time in 11 months, in spite of continued growth of purchasing activity. Stocks of finished goods increased, albeit to the least extent in the current five-month sequence of accumulation. Some panelists reported raising inventory holdings in line with expectations of further new order growth, but others indicated that softer rises in new work in recent months had led to an accumulation of unsold products.
Manufacturers remained optimistic that output will increase over the coming year, with confidence fueled by expected improvements in market demand and new order growth. That said, sentiment eased to a four-month low and was below the series average.
“International demand weakness held back the Vietnamese manufacturing sector in February. New export orders rose at the slowest pace in over three years and signs of softening demand led firms to scale back employment. The sector remained in growth territory, however, with Vietnamese manufacturers able to secure greater volumes of new work despite current challenges,” said Andrew Harker, associate director at IHS Markit, which compiles the survey.
While both output and new orders rose at sharper rates in February, the headline index was pulled down by reductions in employment and stocks of purchases.
The decline in staffing levels was the first in almost three years as manufacturers responded to relatively weak new order growth in recent months. The reduction represented a marked turnaround from a record pace of job creation in November 2018.
Although new orders continued to rise, and at a faster pace than in January, the latest expansion was much slower than those seen towards the end of 2018. The rate of expansion in new export orders, meanwhile, eased to a 37-month low.
Production growth quickened in February and was solid, but the latest rise was below the average seen across 2018. Where output increased, panelists reported that customer demand had improved.
Despite cutting back on staffing levels, Vietnamese manufacturers were again able to reduce their backlogs of work as new order growth remained relatively weak. In fact, outstanding business decreased to the greatest extent in almost a year.
Stocks of purchases fell for the first time in 11 months, in spite of continued growth of purchasing activity. Stocks of finished goods increased, albeit to the least extent in the current five-month sequence of accumulation. Some panelists reported raising inventory holdings in line with expectations of further new order growth, but others indicated that softer rises in new work in recent months had led to an accumulation of unsold products.
Manufacturers remained optimistic that output will increase over the coming year, with confidence fueled by expected improvements in market demand and new order growth. That said, sentiment eased to a four-month low and was below the series average.
“International demand weakness held back the Vietnamese manufacturing sector in February. New export orders rose at the slowest pace in over three years and signs of softening demand led firms to scale back employment. The sector remained in growth territory, however, with Vietnamese manufacturers able to secure greater volumes of new work despite current challenges,” said Andrew Harker, associate director at IHS Markit, which compiles the survey.
