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Tuesday,  Oct 17,2017,20:09 (GMT+7)

September manufacturing output growth hits 5-month high

Phuong Thao
Tuesday,  Oct 3,2017,18:28 (GMT+7)
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September manufacturing output growth hits 5-month high

Phuong Thao

HCMC – Last month saw an improvement in growth momentum at Vietnamese manufacturing firms, with the rate of input cost inflation quickening to the steepest in more than six years, leading to a first rise in output prices since April.

Manufacturing output increased for the eleventh successive month, with the latest rise the most marked since April. All three broad sectors saw production increase, led by consumer goods firms, said a Nikkei report issued yesterday.

The headline Nikkei Vietnam Manufacturing Purchasing Managers’ Index rose to 53.3 in September from 51.8 in August, indicating a solid monthly strengthening of business conditions. The health of the sector has now strengthened in 22 consecutive months.

Anecdotal evidence highlighted an improvement in customer demand over the month, resulting in a sharp and accelerated increase in new business, the most marked in five months. The rate of expansion in new export orders also quickened in September.

Higher new orders contributed to capacity pressures, as signaled by a further rise in backlogs of work.
Andrew Harker, associate director at IHS Markit, which compiles the survey, said the third quarter of the year ended on a positive note for Vietnamese manufacturers as improving client demand breathed fresh life into the sector.

New orders rose markedly, feeding through to faster expansions of output, employment and purchasing activity. Manufacturers are, therefore, well placed to record further growth during the final quarter.

“A cautionary note, though, is signaled by a reemergence of inflationary pressures. Cost inflation was the strongest in over six years amid pressure on the supply of raw materials. In turn, firms upped their own charges for the first time since April,” Harker commented in the report.

Manufacturers also used inventories to help fulfill new orders in September. As a result, stocks of finished goods decreased for the third month running and to the greatest extent since July 2016.

A marked acceleration in the rate of input cost inflation was recorded, linked to higher prices for raw materials, including those sourced from China. The increase in input costs was the strongest since May 2011.

Rising input prices led firms to increase their output charges in September for the first time in five months. The rate of inflation was modest amid reports of competitive pressures.

Higher new orders and a subsequent rise in production requirements encouraged firms to increase their purchasing activity at the end of the third quarter. The rate of expansion was solid and the fastest since April. Stocks of purchases also rose, partly reflective of efforts to build inventory reserves.

Manufacturers remained optimistic that output will increase over the coming year, with positive sentiment linked to predictions of new order growth and business expansion plans. However, optimism was down from August’s five-month high.

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