Vietnam’s production rises at fastest pace since Nov 2018
The Saigon Times
|People work at an auto plant. The improvement in Vietnam’s manufacturing sector in April 2021 was the strongest since November 2018 – PHOTO: VNA|
HCMC – Vietnam’s production in April 2021 rose at the fastest pace since November 2018 amid sharp new order growth, according to a report released by IHS Markit on May 4.
New orders rose at a sharper rate, with firms responding by upping their rate of job creation and ramping up purchasing.
Input costs continued to rise sharply, leading to the fastest increase in selling prices in nearly a decade. Meanwhile, there were some signs that supply-chain disruption had started to ease during the month.
The Vietnam Manufacturing Purchasing Managers’ Index (PMI) increased for the third straight month, posting 54.7 in April following a reading of 53.6 in March. The manufacturing sector was boosted in April by signs that customers were willing to commit to larger orders than they previously did, given the general improvement in demand and control of the Covid-19 pandemic.
The total new orders increased for the eighth straight month running and at the fastest pace in close to two and a half years.
New export orders also continued to rise amid an improving international demand climate. Higher new orders led to a similarly-sized expansion of manufacturing output, with production also up at the fastest pace since November 2018.
Companies boosted production by increasing workforce numbers. Staffing levels were expanded for the third month running and to the greatest extent since December 2018.
This increased capacity, however, was not sufficient to prevent a first rise in backlogs of work in 15 months due to the strength of new order growth.
Besides raising staffing levels, firms also posted a sharp and accelerated expansion of purchasing activity. Respondents indicated that the increase in input buying was both in response to higher new orders and as part of efforts to build reserves to support production growth in the months ahead.
Efforts to expand inventory holdings were generally successful in April, with both stocks of purchases and finished goods increasing. In both cases, the rate of accumulation was solid and faster than at the end of the first quarter.
There were some signs that recent severe disruption to supply chains eased in April. While suppliers’ delivery times continued to lengthen, the latest deterioration in vendor performance was modest and the softest since last September.
Supply shortages and rising shipping costs continued to feed through to higher input prices. The rate of cost inflation remained substantial and was only slightly slower than that seen in March. In turn, firms raised their selling prices sharply, with the rate of inflation quickening to the fastest for close to a decade.
Expectations that the pandemic will remain under control led to higher demand, and the introduction of new product lines, supported ongoing confidence among firms regarding the 12-month outlook for production.
“The Vietnamese manufacturing sector hit the ground running at the start of the second quarter. Output and new orders each rose to the greatest extent since late 2018, and there were encouraging reports that customers were often happy to place larger orders amid greater confidence in the sustainability of the current expansion,” said Andrew Harker, economics director at IHS Markit.
“Inflationary pressures remained elevated, with output prices increasing at the fastest pace for almost a decade. There were some signs, however, that the severity of the difficulties in supply chains may be easing, which will hopefully reduce some of the upward pressure on prices,” Harker added.