HCMC – The Vietnamese manufacturing sector continued to grow at a solid pace in December 2021 and saw job creation resume following a six-month period of falling employment, according to the latest report of IHS Markit.
Cost inflationary pressures remained marked, but eased since November, reflecting signs that supply-chain delays were becoming less pronounced.
The Vietnam Manufacturing Purchasing Managers’ Index (PMI) posted 52.5 in December 2021, up from 52.2 in November and signaling a third successive monthly improvement in business conditions. Moreover, the solid strengthening in the health of the sector was the most marked since May.
A further solid increase in new orders was recorded at the end of last year, with the rate of growth broadly in line with that seen in November. The improvements in customer demand seen since the lifting of Covid-19 restrictions at the start of the final quarter of 2021 continued to fuel expansions in new business.
New export orders also rose, with the rate of increase quickening to an eight-month high. The rise in new orders supported a further expansion in manufacturing output, although the rate of growth slowed amid ongoing pandemic-related disruptions.
There was positive news on the employment front at the end of 2021 as job creation resumed following six months of declining staffing levels. Higher output requirements and efforts to rebuild workforces following the recent wave of the Covid-19 pandemic were behind the increase.
The rise in employment was only marginal, however, with some firms continuing to report that workers had returned to their hometowns and therefore weren’t available.
Continued signs of labor shortages and new order growth combined to further accumulate the backlog of work. Outstanding business was up for the fourth month running, but at the slowest pace in this sequence.
A sharp and accelerated increase in purchasing activity was recorded last month as firms ramped up input buying in response to higher new orders and to attempt to build reserves. Stocks of purchases continued to fall slightly, however, as inputs were largely used to support production.
Manufacturers continued to face delays in the delivery of inputs, but the rate at which lead times lengthened eased for the third successive month and were the weakest since April. There were some reports that the transportation situation was beginning to normalize, but raw material shortages and shipping delays continued to hamper efforts to secure inputs.
Material shortages led to ongoing increases in input prices, while higher costs for oil and freight were also mentioned by panelists. However, the rate of input price inflation eased from that seen in November. Output prices also rose at a softer pace, albeit still well above the series average.
Firms remained optimistic that output would increase in 2022, with sentiment ticking up since November 2021 in hopes that the Covid-19 pandemic will be brought under control over the course of 2022 and demand will strengthen. However, a number of respondents highlighted the unpredictable nature of conditions at present.
“The Vietnamese manufacturing sector ended 2021 in a steady growth phase. Client demand continued to improve in December, but the ongoing circulation of the Covid-19 pandemic is likely restricting the pace of the recovery,” Andrew Harker, economics director at IHS Markit, commented on the latest survey results.
“One positive from the latest PMI survey was that firms were finally able to start rebuilding workforces, albeit marginally, overcoming some of the difficulties in attracting staff back to work following the recent wave of infections. While firms were generally confident about the outlook for output in 2022, the new Omicron variant adds a further layer of uncertainty for the months ahead.”