28 March, 2022 3:13 pm

Vietnam’s February PMI reached 54.3 points, higher than the previous month, making it the country’s fourth consecutive month of growth.

The Purchasing Managers’ Index (PMI) is conducted by surveying leaders of private manufacturing and service companies to assess the overall health of the economy. The PMI takes the threshold of 50 points, in which, the manufacturing sector is confirmed to have an expansion if the PMI is above 50 and, conversely, a contraction if it is below 50.

In February, the Vietnam PMI reached 54.3 points, up from 53.7 points in January, showing four consecutive months of growth.

Vietnam’s manufacturing PMI

According to Andrew Harker, Economic Director at IHS Markit, “Vietnam’s manufacturing sector continues to show good resilience to COVID-19.” Business conditions have improved during the past 5 months after being disrupted by the Delta COVID variant. Overall growth momentum improved thanks to stronger customer demand as the number of new orders rose sharply and the rate of increase was faster than the 10-month high.

On the other hand, international demand also improved in February, causing export activities to continue to increase significantly. Increased new orders and stable business conditions contributed to a fifth straight month of increases in manufacturing output. Like the number of new orders, the rate of increase in output was also the most significant since April 2021.

These factors have boosted business optimism about the outlook for output next year. More than half of the survey respondents said that production is expected to increase here.

However, the production picture is not quite as good as businesses are still having problems with limited supply. According to IHS, this is holding back output growth.

“Companies are still having a hard time convincing a large enough number of workers to return to their factories to deal with the backlog of work, while raw materials are still scarce,” said Andrew Harker.

Manufacturers said that input prices continued to increase sharply, reflecting the increase in selling prices of raw materials by suppliers. The company also mentioned the recent surge in oil prices. Shifting the cost burden to customers has made the monthly selling price higher than the previous month for 18 months. The growth rate was faster than in January.

Purchase activity of input goods increased sharply in February as companies tried to import goods to support increased output. As a result, inventories of purchased goods increased at the fastest rate in 10 months, becoming the largest increase ever recorded. Finished goods inventories also increased in the middle of the first quarter, although the increase was only slight. Survey results suggest that this increase reflected not only the increase in the number of new orders but also the difficulties in delivering finished goods to customers amid transportation difficulties.

However, the IHS side also said that manufacturers are hoping that difficulties will gradually ease in the coming months, helping output get out of this stagnation.

Duc Minh. “Vietnam’s Manufacturing Is on the Way to Recovery.” VNEXPRESS, 2022, vnexpress.net/san-xuat-viet-nam-tren-da-phuc-hoi-4433338.html. (Accessed Mar. 1, 2022)

Translated by: Pham Hoang Hung