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Monday, June 17, 2024

Manufacturing growth continues in May

By Dat Thanh

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HCMC – Vietnam’s manufacturing sector saw sustained growth in May with solid increases in new orders, prompting a faster expansion in production, according to the S&P Global Vietnam Manufacturing Purchasing Managers’ Index (PMI).

The PMI remained steady at 50.3 in May, indicating a marginal improvement in business conditions for the second consecutive month. The sector’s health showed little fluctuation during the first five months of 2024.

New orders grew thanks to a strengthening demand environment, helping firms secure new customers. However, the rate of expansion was slightly lower than in April. Export orders also rose, but to a lesser extent than overall new business.

Despite increased orders and production, employment in the sector declined for the second month in a row. Resignations and extended staff absences contributed to this drop. The reduction in workforce numbers was the largest in nearly a year.

Andrew Harker, economics director at S&P Global Market Intelligence, said, “New orders were up solidly, driving a sharper increase in production. However, staffing levels and inflationary pressures are concerning. Employment fell again, and cost inflation was the fastest in nearly two years, potentially restricting future demand.”

Manufacturers increased their purchasing activity in response to rising output requirements. The rate of purchasing growth was higher than in April. However, input costs saw a marked rise, the fastest since June 2022. Factors contributing to higher input prices included currency depreciation and increased oil and fuel costs. About 25% of respondents reported higher input costs, while 5% noted a decrease.

As a result of rising input costs, manufacturers raised their selling prices for the first time since February.

Supplier delivery times lengthened slightly in May, linked to goods shortages and geopolitical issues. Stocks of both purchases and finished goods continued to fall, extending current depletion sequences to nine and five months, respectively.

Manufacturers remain cautiously optimistic about the year ahead, supported by expansion plans, new product launches, and continued growth in new business. However, optimism remains below the series average.

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