Vietnam’s June Factory Activity Rebounds from May’s 14-month Low

Growth in the Vietnamese manufacturing sector improved at the end of the second quarter of the year, following a slowdown in May, thanks to a solid rise in new orders.

The headline Nikkei Vietnam Manufacturing Purchasing Managers’ Index (PMI), which measures manufacturing performance, increased to 52.5 in June, compared to May’s 14-month low of 51.6.

The latest reading signaled a solid improvement in the health of the sector, and one that was above the average since the survey began in March 2011, says the report jointly released by Nikkei and Markit.

In terms of PMI, Vietnam climbed to the second place among ASEAN countries, only after the Philippines. Vietnam’s April PMI topped ASEAN peers for the third month in a row.

After having slowed markedly in May, the rate of growth in new orders in Vietnam accelerated in June. The latest increase in new business was solid, thanks to strengthening market demand. New export orders also rose at a faster pace in June.

New order growth, allied with strengthening client demand, resulted in an eighth successive monthly increase in output. The rate of expansion ticked up from that seen in May.

Manufacturers raised their purchasing activity for the nineteenth month running, and at a solid pace. This helped lead to an increase in stocks of purchases, with a number of firms mentioning efforts to build inventory reserves, adds the report.

It notes that business sentiment eased further in June, dropping for the fourth successive month to the weakest since June 2013. However, the latest reading still indicated solid optimism, with positive sentiment reflecting expectations of strengthening market demand, success in securing new orders and plans to expand capacity.

“The pick-up in growth in the Vietnamese manufacturing sector in June allays some of the concerns that were raised by the marked slowdown seen in May, with a solid rise in new business particularly encouraging,” said Andrew Harker at IHS Markit, which compiles the survey.

“Although slightly down on the first quarter of the year, the average PMI reading over Q2 points to a further solid expansion of Vietnamese manufacturing output. IHS Markit forecast a rise of 6.2% in Vietnamese GDP this year, with these data suggesting that the manufacturing sector continues to make a positive contribution,” Harker added.

Tuan Minh / BizLIVE