The rate of input cost inflation accelerated slightly, but manufacturers lowered their output prices as part of attempts to support growth of new business.— File Photo

HCM CITY (Biz Hub)— Business conditions in the Vietnamese manufacturing sector improved in December as output and employment increased at sharper rates thanks to the growing renewed orders, according to HSBC's report released yesterday.

Meanwhile, purchasing activity rose at the fastest pace in the series history.

The rate of input cost inflation accelerated slightly, but manufacturers lowered their output prices as part of attempts to support growth of new business.

The headline seasonally adjusted Purchasing Managers' Index (PMI) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – posted 51.8 in December, up from 50.3 in November.

An index reading above 50 indicates an overall increase in that variable, below 50 an overall decrease.

The reading signalled a fourth successive monthly improvement in operating conditions, and the second-strongest in the history of the series.

Only April 2011 has seen a greater improvement in business conditions since the survey began in that month.

New orders increased for the third time in the past four months during December as panelists reported improving client demand.

Moreover, new business rose at a pace that was only slightly slower than October's series record.

On the other hand, new export orders decreased for a second consecutive month.

Growth of new orders led firms to raise their production. Output increased for the third month running, and at the sharpest pace since April 2011. That said, stocks of finished goods fell solidly as firms delivered products to customers.

The depletion of post-production inventories was the strongest in seven months.

Rising workloads had a positive impact on employment in December, with the rate of job creation picking up to the strongest in three months.

Meanwhile, the rate of expansion of purchasing activity hit a record high as panelists reported a greater need for inputs in response to rising client demand.

There were signs of spare capacity in the sector, however, as backlogs of work decreased for the second month in a row.

The rate of depletion was solid and largely unchanged from that seen in November.

Input prices increased further in December, with some panelists linking inflation to a scarcity of raw materials.

In contrast, manufacturers lowered their output prices for the first time in three months.

According to panelists, attempts to encourage new business had been behind the fall in charges, while competitive pressures were also mentioned.

A third successive shortening of suppliers' delivery times was recorded.

The rise of the new orders sub-index is a sign of gradually rising domestic demand, albeit slowly. The new export orders index improved slightly but external demand was still a drag. —VNS