Home » Industry » Vietnam manufacturing contracts in May

Vietnam’s manufacturing sector continued its subdued start to 2013, as May saw outputs, new orders and employment all slip back into contraction following modest gains in the previous two months.

At 48.8, down from 51.0 in April, the seasonally adjusted HSBC Vietnam Manufacturing PMI posted below the neutral 50.0 mark for the first time since February.

Vietnam manufacturing contracts in May

The domestic market continued to be the main drag on manufacturing performance, whereas new export business showed a modest recovery. New export orders have increased in each of the past three months, with May’s growth being the fastest since April 2012. Companies also reported stronger demand from clients in China and the US.

Job losses were reported in May for the second time in four months, as companies remain cautious about hiring. In addition to depressed demand, companies linked the cut in payroll numbers to cost control initiatives. This also played a role in purchasing and stock-holding decisions, leading to lower levels of both pre- and post-production inventories and a modest scaling back on input buying.

The May data indicates that inflationary pressure remained relatively mild for prices in the manufacturing sector. Although average input costs increased for the fifth consecutive month, the inflation rate was at its lowest that period.

Shortages of certain raw materials were reported and increased import prices resulted in higher costs. However, this was partly offset by decreased demand, which led to lower prices for a number of inputs.

Meanwhile, average output prices, were broadly unchanged during the month, as competitive pressure stifled manufacturers’ pricing power. The vast majority of companies (almost 84%) reported no change in factory gate prices.



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