The Purchasing Managers' Index (PMI) for September said new orders and employment both increased at survey record rates, and there was a marked gain in foreign sales.— Photo vinacorp

HCM CITY (Biz Hub)— A survey of manufacturers last month has brought positive news on the health of the sector, according to a HSBC report released on Tuesday.

The Purchasing Managers' Index (PMI) for September said new orders and employment both increased at survey record rates, and there was a marked gain in foreign sales.

There were reports that underlying economic conditions were improving, supporting demand and raising market activity, it said.

The headline seasonally adjusted PMI – which is meant to provide a snapshot of operating conditions in the manufacturing sector – rose back above the 50.0 no-change mark to 51.5.

That was an improvement on August's 49.4 and the best reading since April 2011, the first month for which survey data is available.

Driving the PMI higher were new business and employment.

Growth of new business was solid, the survey said, reflective of an improvement in underlying demand from domestic and foreign clients.

Better product quality and competitive pricing – with the latest survey showing a sixth successive monthly decline in prices – also supported sales growth.

New export business rose at a series record pace. It was the first time in four months that an increase in new export sales had been registered.

Encouraged by higher sales, payrolls continued to expand in the manufacturing sector.

Backlogs of work continued to decline, marking the 18th consecutive month that work outstanding had been cut.

Stocks of finished goods rose slightly and manufacturers were able to add to stocks and cope with a rise in new orders while maintaining a broadly stable level of output.

Despite easing from August's high, the degree to which average costs rose was again marked and, with prices falling in line with ongoing competitive pressures, profit margins continued to be squeezed.

Fuel, utility, and raw material costs all rose.

Commenting on the survey, Trinh Nguyen, the bank's Asia economist, said: "The above 50.0 PMI reading is reflective of improved global demand for Vietnamese goods as well as a stabilisation of domestic conditions.

"While we expect output to pick up in [the second half] thanks to an expected recovery in the euro zone, China, the US, and Japan, internal demand is still lacklustre. While prices rose in Q3 2013, we expect inflationary pressures to remain contained." — VNS