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New manufacturing orders rise faster in August
Phuong Thao
Tuesday,  Sep 5, 2017,22:46 (GMT+7)

New manufacturing orders rise faster in August

Phuong Thao

HCMC – The recent modest improvements in the Vietnamese manufacturing sector continued in August, with slightly faster increases seen in output and new orders.

According to a recent report by Nikkei, central to the latest improvement in business conditions was the solid and accelerated rise in new orders. New business has increased continuously since December 2015, with stronger client demand mentioned by respondents.

The rate of expansion in new export orders also quickened and was the fastest in four months. Rising new orders led to another increase in manufacturing production, the tenth in as many months.

The headline Nikkei Vietnam Manufacturing Purchasing Managers’ Index (PMI) ticked up to 51.8 in August from 51.7 in July, extending the current sequence of strengthening business conditions to 21 months.

Higher output requirements encouraged firms to take on extra staff. The rate of job creation was only marginal, and the slowest in the current 17-month sequence of rising employment.

Staff shortages and rising new orders were reportedly factors leading to a second successive monthly rise in backlogs of work. Although easing from July’s 75-month high, the rate of accumulation was still one of the sharpest in the series history.

Raw material shortages were a feature of the latest survey, contributing both to higher input costs and longer suppliers’ delivery times. The rate of input price inflation quickened to a four-month high, and was sharp.

Andrew Harker, associate director at IHS Markit, which compiles the survey, said the Vietnamese manufacturing sector continued to perform steadily mid-way through the third quarter of the year.

There were further positive signs regarding new orders which should help the sector maintain growth going forward. The weakness of the latest increase in employment is disappointing. Job creation will hopefully pick up in coming months given further reports of pressure on capacity.

Besides, raw material shortages were a feature of the latest survey, meanwhile, causing a marked acceleration of cost inflation and delivery delays from suppliers.

Purchasing activity increased at a faster pace, with the latest expansion linked to higher new orders. Stocks of purchases also rose, the 14th month running in which this has been the case.

Post-production inventories, on the other hand, decreased for the second successive month, albeit marginally. Panelists suggested that the dispatch of finished products to customers had been behind the reduction.

Business confidence improved in August and was the strongest since March. Anecdotal evidence suggested that firms were planning to increase output, helped by expansions in capacity and predictions of rising new orders. More than 56% of respondents predicted a rise in production over the coming 12 months.

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