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Vietnamese manufacturing sector grows stronger

Vietnamese manufacturing sector grows stronger

People work at a footwear company. The Vietnamese manufacturing sector saw faster expansions in output, new orders and exports in March – PHOTO: VNA

HCMC – The Vietnamese manufacturing sector grew steadily at the end of the first quarter, with increases in output, new orders and exports recorded, according to a report released by IHS Markit today, April 1.

The sector saw stronger rises in employment and purchasing activity in March, while business confidence surged to a 20-month high.

On a less positive note, disruption to supply chains led to strengthening inflationary pressures. Input costs and output prices rose at the fastest rates in just over three and four years, respectively.

The Vietnam Manufacturing Purchasing Managers' Index (PMI) rose to 53.6 in March, up from 51.6 in February, signaling a vast improvement in the health of the manufacturing sector. Business conditions strengthened to the greatest extent in 27 months.

Signs of improving customer demand and success in keeping the Covid-19 pandemic under control supported rises in new orders and output last month.

New business increased for the seventh straight month, and at the fastest pace since July 2019. In some cases, clients had expanded their order sizes over the month. There were also signs of improvement in international demand conditions, leading to the greatest increase in new business from abroad since November 2018.

Production rose at a much faster pace than in February, with the rate of growth hitting a 20-month high.

Higher new orders and expanded production requirements encouraged Vietnamese manufacturers to increase their staffing levels and purchasing activity in March.

Employment rose at a modest pace, but was the strongest since June 2019. Similarly, input buying increased to the greatest extent in 20 months.

Difficulties sourcing raw materials remained, with suppliers' delivery times continuing to lengthen. Issues with the importing of items, material shortages and a lack of shipping containers all contributed to longer lead times.

Stocks of finished goods also rose due to a combination of higher production and issues with the delivery of orders.

Shortages of raw materials, often due to the Covid-19 pandemic, led to a sharp and accelerated increase in input costs in March.

Output prices, meanwhile, increased at the sharpest pace in just over four years as manufacturers passed on higher input costs to their customers.

“The Vietnamese manufacturing sector saw growth step up a level in March, with production rising at the fastest pace in 20 months, according to the latest PMI data. Based on the historical relationship between the PMI and official numbers, the latest figures suggest manufacturing production saw double-digit growth year-on-year in the first quarter,” said Andrew Harker, economics director at IHS Markit.

“Particularly encouraging in the latest set of figures was the strength in export orders as international demand shows signs of improvement. Hopes that these trends will continue and that the pandemic will come to an end supported the greatest business confidence since mid-2019. The sector therefore looks well set to make further progress in the second quarter,” Harker added.

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