Manufacturing sector index shows signs of life

It explained that the PMI is a composite index based on five of the individual indices: New Orders, Output, Employment, Suppliers’ Delivery Times and Stock of Items Purchased. An index reading of above 50 indicates an overall increase in that variable, and below 50 an overall decrease. An HSBC press release yesterday said that the PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in around 400 manufacturing companies.

"The stabilisation of manufacturing activity in Viet Nam is a positive development, especially given the downturn of the global trade cycle and the still-fragile domestic business environment," the release said, quoting Trinh Nguyen, Asia Economist at HSBC.

However, the PMI still signalled a worsening of manufacturing sector’s operating conditions during September, "although the rate of deterioration was only slight", the release said.

Manufacturing output in September did not change much since August, following a solid reduction in July.

New orders decreased again in September, and this can be attributed to "subdued market demand conditions", the release said, adding that the rate of decline in new work was "the weakest in the current five-month period of contraction.

"In contrast, the pace of reduction in new export business accelerated since the month before. Although only modest, the latest decrease in foreign orders was the sharpest recorded by the series to date," it said.

The size of the manufacturing sector workforce also showed little change in September.

Meanwhile, "backlogs of work declined at a sharp rate that was the steepest in the short series history. The latest decrease in outstanding business extended the current period of reduction to six months", the release said.

Purchasing activity continued to fall in September, but the rate of decline in input buying was only slight, having eased markedly for a second successive month, it said.

Companies continued to report shorter lead times from vendors, reflecting sufficient stock of inputs at suppliers.

"Average input costs faced by goods producers rose for a second successive month in September, with the rate of inflation accelerating to a five-month high," the release noted.

It cited an "overwhelming" number of survey respondents as saying the main reason for a rise in average prices was that raw material costs had increased over the month. Some also mentioned higher fuel prices.

Despite the rise in average costs, goods producers reduced their output charges during September in an attempt to attract new business, although the rate of discounting was slight.