AsemconnectVietnam - Vietnam’s manufacturing sector retained its growth momentum last month as output rose on the back of a stronger expansion in new orders, according to a Nikkei report released on February 1.

New orders increased for the second successive month in January, and at a solid rate that was faster than recorded in December. Firms reported that rising demand of clients had been the main factor leading to new order growth, the report said.

Andrew Harker at Markit, which compiled the survey, said the most pleasing aspect of the latest set of manufacturing PMI figures for Vietnam was a quickening in the rate of growth of new orders at the start of 2016, showing that local firms are still able to generate new business despite a challenging global environment.

While job creation remained weak, a build-up of outstanding business suggests that manufacturers might need to up their rate of hiring in the coming months to keep on top of workloads.

“With the Trans-Pacific Partnership (TPP) trade agreement set to be signed later this week, thereby kicking off the ratification stage, 2016 could lead to further positive developments in the Vietnamese economy following a solid start to the year,” Harker said in the report.

The rise in total new business contributed to a second increase in output in as many months, with the rate of expansion broadly in line with that seen in the previous month. The acceleration in the pace of new order growth reportedly led to a build-up of backlogs of work in the sector, the first in eight months. Although modest, the rate of accumulation was the sharpest since November 2014.

Meanwhile, input costs continued to fall in January, extending the current sequence of decline to seven months. Moreover, the pace of reduction quickened from that seen in December, with panelists linking lower input prices to falling costs for commodities including oil.

In a number of cases, declining input prices were passed on to clients, leading to a further decrease in output charges.

Besides, higher purchasing activity led some firms to see a rise in stocks of inputs. However, this was canceled out by the use of inputs in the production process, leaving pre-production inventories largely unchanged overall.

Difficulties for suppliers in securing goods and an increase in the number of deliveries contributed to longer lead times in the sector, with vendor performance deteriorating at a stronger rate.

Source: Intellasia