Manufacturing continues recovery
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Vietnam’s purchasing managers’ index rose to 53.7 in January 2022 from 52.5 in December, marking the highest growth since last April. The new index also points to the fourth straight month of growth, according to a report by U.K. research company IHS Markit. IHS Markit Vietnam Manufacturing Purchasing Managers’ Index measures the performance of the manufacturing sector and is derived from a survey of 400 companies.
The index is based on five individual indexes with the following weights: new orders (30 percent), output (25 percent), employment (20 percent), supplier delivery times (15 percent) and stock of items purchased (10 percent), with the delivery times index inverted so it moves in a comparable direction.
A reading above 50 indicates an expansion of the manufacturing sector compared to the previous month; below 50 represents a contraction; while 50 indicates no change.
Both output and new orders increased at sharper rates in the opening month of the year as customer demand continued to improve. In each case the rate of expansion was the sharpest in nine months. Total new orders were supported by a further improvement in new business from abroad, with the rate of growth quickening to the fastest since November 2018, IHS Markit stated in its January report for Vietnam.
Firms were also increasingly confident in the year-ahead outlook for production, although optimism depends to some extent on the pandemic being brought under control. Around 60 percent of respondents predicted a rise in output, with overall optimism the strongest in over three years.
“Around 60 percent of respondents predicted a rise in output, with overall optimism the strongest in over three years.”
There were further signs inflationary pressures have become less pronounced than seen through much of 2021. Input costs increased at the second-slowest pace in seven months, while output price inflation eased to the weakest since last September.
According to respondents, a key factor behind rising input costs was higher charges for freight and international shipping. Problems with shipping and ongoing disruption caused by the pandemic mean supplier delivery times continued to lengthen at the start of the year.
A second successive rise in employment was recorded in January as firms continued to rebuild workforce numbers following the Delta wave of the pandemic in 2021. The rate of job creation picked up from that seen in December but remained only modest as some staff were off work with Covid and others had yet to return from their hometowns.
Commenting on the latest survey results, Andrew Harker, Economics director at IHS Markit, said: “Vietnamese manufacturers made a positive start to 2022, with the absence of any widespread restrictions meaning that the sector was able to grow despite relatively high Covid-19 case numbers. Firms were also increasingly confident about the year-ahead outlook.
“The pandemic continues to impact the sector, however, most notably through staff absences, while the possibility of sharply rising case numbers due to the Omicron variant could lead to even more disruption,” he said. A further headwind remains issues with shipping, which affected deliveries from suppliers and the ability of firms to deliver to customers, as well as adding to cost burdens.”
Questions & Answers
Q.Which specific components of the manufacturing index saw the most significant growth in January 2022?
Which specific components of the manufacturing index saw the most significant growth in January 2022?
Both output and new orders increased at sharper rates, marking the steepest expansion in nine months. Total new orders also benefited from a quickening growth in new business from abroad, the fastest since November 2018.
Q.What factors are contributing to the increased input costs for manufacturers, according to the report?
What factors are contributing to the increased input costs for manufacturers, according to the report?
A key factor identified by respondents was higher charges for freight and international shipping. Problems with shipping and ongoing disruption from the pandemic also continued to lengthen supplier delivery times.
Q.What is the general sentiment among manufacturing firms regarding their production outlook for the coming year?
What is the general sentiment among manufacturing firms regarding their production outlook for the coming year?
Firms are increasingly confident about future production, with around 60 percent of respondents predicting a rise in output. Overall optimism is the strongest it has been in over three years, dependent on the pandemic being controlled.
Q.How have inflationary pressures changed for the Vietnamese manufacturing sector at the start of 2022?
How have inflationary pressures changed for the Vietnamese manufacturing sector at the start of 2022?
Inflationary pressures have become less pronounced compared to 2021. Input costs increased at the second-slowest pace in seven months, while output price inflation eased to its weakest rate since last September.
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