Manufacturing production up for second month running

The S&P Global Vietnam Manufacturing Purchasing Managers' Index (PMI) was unchanged at 50.3 points in May, signalling a second consecutive marginal monthly improvement in business conditions in the sector.

The health of the sector has fluctuated only fractionally through the opening five months of 2024, according to a report by S&P Global.

New orders increased solidly again in May, as strengthening demand helped firms to secure new customers and bring in new business. The rate of expansion was slightly softer than that seen in April, however.

Meanwhile, new export orders also increased, albeit to a lesser extent than total new business.

The expansion of total new business encouraged manufacturers to raise their production volumes for the second month in a row. Moreover, the rate of growth quickened to the fastest since September 2022.

Despite the increases in new orders and output, manufacturers recorded a second successive monthly fall in employment midway through the second quarter.

Anecdotal evidence suggested that employee resignations and extended absences had been behind the drop in workforce numbers, which was solid and the most pronounced for almost a year.

Despite the drop in staffing levels, firms were able to keep on top of workloads in May and reduced outstanding business, following a marginal increase in the previous survey period.

While employment continued to fall, another expansion of purchasing activity was registered in May as firms responded to rising output requirements. The increase was the second in as many months, and more marked than in April.

The sharp rise in input costs fed through to an increase in selling prices in the first in three months. The pace of charge inflation was the joint-steepest in 15 months, on a par with that seen in October 2023.

The report pointed out that factory expansion plans, the launch of new products and the prospect of continued growth of new business all supported confidence in the year-ahead outlook for production. Sentiment was broadly unchanged from that seen in April, remaining below the series average to signal relatively muted optimism.

Andrew Harker, economics director at S&P Global Market Intelligence, said “The latest S&P Global Vietnam Manufacturing PMI data was something of a mixed bag. On the positive side of the ledger, new orders were up solidly again amid signs that demand growth is being sustained, prompting a sharper increase in production in May."

"On the other hand, there are concerns around staffing levels and inflationary pressures. The former decreased again and at a solid pace, potentially limiting capacity at firms. Meanwhile, cost inflation was the fastest in close to two years, feeding through to higher output prices. This could have the effect of restricting demand in the months to come. Overall, companies are optimistic, with success in securing new business hopefully acting to overcome the headwinds being felt elsewhere," Harker said.

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