Vietnamese manufacturing output returns to growth in October: S&P Global

The report outlined that Vietnam’s Manufacturing Purchasing Managers' Index (PMI) posted 51.2 in October, up from 47.3 in September and back above the 50.0 no-change mark following the disruption caused to the sector by Typhoon Yagi in the previous month.

Business conditions have now been strengthened in six of the past seven months, although the improvement in October remained modest.

Central to the renewed strengthening of the health of the sector were the returns to growth of both production and new orders as the recovery from the typhoon got underway.

Experts pointed out that in each case, rates of expansion were softer than in the months leading up to September as some firms continued to endure disruptions following the storm and subsequent flooding.

Alongside the rise in total new businesses, new export orders also increased in October. However, the rate of expansion was only marginal amid several reports of subdued international demand.

With some firms reportedly still operating below full capacity due to the impact caused by the typhoon, backlogs of work have accumulated for the fifth month running, albeit to a lesser extent than the two-and-a-half year high posted in September.

Meanwhile, employment ticked down, reversing the rise seen in the previous month. Some firms reported that resignations had caused a drop in their staffing levels.

Most notably, suppliers' delivery times lengthened for the second month running in October as storm disruption continued to affect transportation.

Purchasing activities returned to growth amid higher new orders and expected increases in production in the months ahead.

Manufacturers reported a rise in input costs amid currency weakness and higher prices for oil, metals, and transportation. In turn, firms increased their own selling prices. However, the rate of charge inflation was only slight as some respondents indicated that competitive pressures had led them to offer discounts.

Insiders analysed that rising sales, hopes for stable market conditions, and business expansion plans, had all been factors contributing to the positive expectations regarding manufacturing production over the coming year.

However, optimism dipped to a nine-month low and was weaker than the series average. Some firms indicated that uncertainty around the United States Presidential Election had served to dampen confidence.

Andrew Harker, economics director at S&P Global Market Intelligence, stressed that October’s data showed that the recovery from the disruption caused by typhoon Yagi got underway during the month, with firms seeing a rise in new orders and being able to expand their production.

“Some companies are still suffering from the effects of the storm, however, limiting rates of expansion. We should hopefully therefore see growth pick-up as more manufacturers get back up to full capacity towards the year end," he noted.