Manufacturing output keeps rising

Tuesday, Mar 03, 2015 08:00

Inspectors check an electronics store in north central Ha Tinh. Viet Nam's Purchasing Managers Index (PMI) increased to 51.7 in February. — VNA/VNS Photo Tran Viet
HCM CITY (Biz Hub) — The manufacturing sector maintained its recent period of growth in February, with new orders and output both rising at faster rates than at the start of the year, HSBC's Purchasing Managers' Index reveals.

The headline seasonally adjusted index recorded a further steep reduction in input prices in line with lower fuel costs, and this fed through to another marked fall in prices charged.

The PMI, a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy, posted 51.7 in February, up marginally from the reading of 51.5 seen in January.

Operating conditions in the sector have now strengthened on a monthly basis throughout the past year and a half.

New orders increased at a solid pace in February, with the rate of expansion slightly stronger than in January.

New business has now risen for six successive months, with respondents reporting improved client demand, good quality products and competitive pricing.

In contrast, new export orders decreased, ending a five-month sequence of growth.

The latest rise in overall new business led to a further expansion in output, the 17th in as many months. As was the case with new orders, the rate of expansion in production quickened from that seen at the start of the year.

Higher production enabled companies to work through backlogs in February, with outstanding business falling at a solid pace for the second month running.

Greater production requirements led to rises in employment and purchasing activity. Staffing levels increased for the sixth successive month, albeit at the weakest pace since last September.

Meanwhile, the latest expansion in input buying extended the current sequence of growth to 18 months.

Reductions in fuel costs was the main factor leading to another drop in input prices at manufacturing firms. The rate of decline was substantial, albeit weaker than the previous month's series record. With input prices continuing to fall, firms lowered their output prices accordingly. Charges decreased for the fifth month running, and at a marked pace.

Suppliers' delivery times shortened for the fifth month in a row during February. The latest improvement in vendor performance was modest, but the strongest since September 2012. Firms attributed the shortening of lead times to requests for faster deliveries and sufficient inventory holdings by suppliers.

Despite increased purchasing activity, stocks of inputs decreased for the second month running as items were used in the production process. Meanwhile, stocks of finished goods were broadly unchanged in February following a marginal fall at the start of the year. Those panellists that reported a rise in post-production inventories indicated that finished products were awaiting delivery. On the other hand, higher sales led some firms to record a fall in stocks of finished goods.

Commenting on the survey, Andrew Harker, senior economist at Markit, a leading, diversified global provider of financial information services that co-operates with HSBC to do the survey, said: "As Viet Nam welcomes in the Lunar New Year, there was further good news on the manufacturing front in February. Production and new business each rose at sharper rates, with firms linking higher client demand to competitive pricing.

"Lower fuel costs are driving prices in the sector down, in line with the weakest rate of consumer price inflation since 2001." — VNS

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