HO CHI MINH CITY, June 2 (Xinhua) -- Overall business conditions in the Vietnamese manufacturing sector strengthened in May amid ongoing improvements in client demand, with output increasing for the eighth consecutive month amid another solid expansion in new business, the Hong Kong and Shanghai Banking Corporation (HSBC) said Monday.
In a report, the bank said the Purchasing Managers' Index (PMI) , a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing sector, posted 52.5 in May from 53.1 in the previous month to signal an improvement in operating conditions at Vietnamese manufacturing firms.
Growth of new orders was recorded for the sixth successive month in May, with the solid rate of expansion only slightly weaker than April's record high. Improving economic conditions had helped to support client demand. New export orders also rose in May, but the rate of growth was only slight.
Higher customer demand led to another rise in production during the month, the eighth in a row. Purchasing of materials in recent months had enabled them to raise output. Production growth helped firms to work through outstanding business. Backlogs decreased modestly following a rise in the previous month.
Despite the sharp rise in input costs, manufacturers left their output prices largely unchanged during the month. Employment increased for the second month running in May, although the rate of job creation slowed and was only slight.
Stocks of purchases decreased modestly as inputs were used in the production process. Stocks of finished goods were also depleted following a rise in the previous month.
Commenting on the Vietnam Manufacturing PMI survey, Trinh Nguyen, Asia Economist at HSBC said "The latest PMI shows that the manufacturing sector in Vietnam is competitive, with activity still expanding, albeit at a slower pace. The concern really is the added costs to manufacturers, which come at a time when exporters already incur high logistic costs." "Profit margins are being squeezed, as weak domestic demand makes it hard for manufacturers to raise output prices despite rising production costs. We expect the State Bank of Vietnam to keep rates steady to support domestic demand," said Nguyen.
The HSBC Vietnam Manufacturing PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in around 400 manufacturing companies on five of individual indices of new orders, output, employment, suppliers' delivery times, and stock of items purchased.