The Vietnamese manufacturing sector has seen a pickup in new orders, leading to higher output, employment and purchasing activity.

The S&P Global Vietnam Manufacturing Purchasing Managers’ Index (PMI) was 51.2 in February, ending a string of contractions and up 3.8 points from 47.4 in January.

The PMI was derived from responses to monthly questionnaires sent to purchasing managers at around 400 major Vietnamese manufacturers, with the 50.0 mark separating contraction from expansion.

The improvement was attributed to signs of market demand bouncing back. This helped firms secure new customers and see the sharpest increase in new orders since last August, leading to a rise in production, employment, and purchasing activity midway through the first quarter.

“Improving demand conditions both domestically and internationally breathed new life into the Vietnamese manufacturing sector in February, snapping a three-month soft patch around the turn of the year. Output, new orders, employment and purchasing activity all returned to growth as business confidence strengthened on an improving demand outlook,” said Andrew Harker, Economics Director at S&P Global Market Intelligence.

With stronger market demand and the growth of new orders, the optimistic outlook for the sector strengthened further, with sentiment picking up for the third straight month and being the highest since last September.

Meanwhile, Vietnam’s index of industrial production (IIP) in February rose 3.6% month-on-month and 5.1% year-on-year, data from the General Statistics Office of Vietnam showed.

However, IIP in the first two months contracted by 6.3% over the same period last year due to economic woes, inflationary pressures, fewer new orders and a plunge in export revenue.

As cost pressures continued to build, with input prices rising at the fastest pace since the middle of last year, manufacturers would raise their selling prices to secure profit.

“One lingering area of concern, however, is inflation, with both input costs and selling prices rising at the fastest rates in eight months in February. Firms will be hoping to see these pressures ease as the year progresses to make sure demand improvements can be sustained,” Harker added.

Saigon Times