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Manufacturing sector sees sharp growth in June

The Saigon Times

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HCMC – Vietnam’s manufacturing sector experienced a significant rebound in June, driven by a surge in new orders, according to the latest data from S&P Global.

The Vietnam Manufacturing Purchasing Managers’ Index (PMI) rose to 54.7 in June from 50.3 in May, the strongest expansion since late 2018.

New orders increased at near-record rates, with both domestic and export demand contributing to the growth. Competitive pricing strategies helped firms secure additional business, leading to the steepest rise in output in over five years.

Employment in the sector also saw growth. Firms increased staffing levels for the first time in three months to address the backlog of work. Some of these positions were temporary, reflecting cautious hiring amid the recovery.

“The Vietnamese manufacturing sector burst into life at the midway point of the year, shrugging off the relatively modest growth seen in recent months thanks to a rapid increase in new orders. The strength of the expansion in new work highlighted staff shortages at some firms and resulted in an accumulation of outstanding business. In response, firms took on additional staff at a solid pace,” said Andrew Harker, economics director at S&P Global Market Intelligence.

Input costs rose to a two-year high, driven by higher transportation and oil prices. Consequently, manufacturers raised their selling prices at the fastest pace since June 2022. This increase in costs could potentially impact future demand.

Firms ramped up their purchasing activities, with input buying reaching the highest level since June 2022. Despite this, inventories of raw materials and finished goods fell as companies utilized existing stocks to meet demand. Supplier delivery times improved slightly due to better raw material availability, although international shipping issues persisted.

The outlook for the sector remains positive, with about half of the surveyed firms expecting further growth in the year ahead. However, “rising inflation could act to dampen demand further down the line,” Harker noted.

The S&P Global Vietnam Manufacturing PMI is a monthly index that measures the performance of the Vietnamese manufacturing sector. It is compiled from responses to questionnaires sent to purchasing managers at some 400 Vietnamese manufacturing companies.

The index ranges from 0 to 100, with a reading above 50 indicating an expansion in the sector compared to the previous month, and a reading below 50 showing a contraction.

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