The Vietnam Manufacturing Purchasing Managers’ Index (PMI) rose to 52.5 in June from a 14-month low of 51.6 in May, the latest survey from Nikkei’s IHS Markit showed on Monday.

A reading above 50 indicates economic expansion, while a reading below 50 points towards contraction.

"The pickup in growth in the Vietnamese manufacturing sector in June allays some of the concerns that were raised by the marked slowdown seen in May, with a solid rise in new business particularly encouraging," Andrew Harker at IHS Markit said.

“Although slightly down from the first quarter of the year, the average PMI reading over Q2 points to a further solid expansion of Vietnamese manufacturing output. IHS Markit forecast a rise of 6.2 per cent in Vietnamese GDP this year, with this data suggesting that the manufacturing sector continues to make a positive contribution.”

According to the survey, the latest reading signalled a solid improvement in the health of the sector and one that was above the average since the survey began in March 2011.

After having slowed significantly in May, the rate of growth in new orders accelerated in June. The latest increase in new business was solid and linked by panellists to strengthening market demand. New export orders also rose at a faster pace in June.

The expansion in total new business reflected growth in the consumer and intermediate goods sectors, with the pace of increase particularly strong in the former. Meanwhile, investment goods firms saw new orders decline.

New order growth, allied with strengthening client demand, resulted in an eighth successive monthly increase in output. The rate of expansion ticked up from that seen in May.

The rate of job creation also accelerated in June, with manufacturers in Viet Nam responding to higher new orders and production requirements. This added operating capacity facilitated the reduction of the work backlog at some companies.

According to the survey, manufacturers raised purchasing activity for the nineteenth month running, and at a solid pace. This helped lead to an increase in stocks of purchases, with a number of firms mentioning their efforts to build inventory reserves. Post-production inventories also expanded in June, but only slightly as some companies used inventories to help fulfil orders.

"The rate of input cost inflation picked up but remained much weaker than seen in the first three months of the year. Despite higher cost burdens, firms reduced their output prices for the second month running amid reductions in the costs of some inputs and efforts to secure sales," it stated. — VNS