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Vietnam's manufacturing activity improved in May

14:23 | 02/06/2020

The sector saw a slight improvement than in April as the Covid-19 pandemic was brought under control in Vietnam.

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vietnams manufacturing activity improved in may
(Photo: IHS Markit)

According to Hanoitimes, the Vietnam Manufacturing Purchasing Managers' Index™ (PMI) rose ten index points in May, posting 42.7 up from April's record low of 32.7, signaling a much softer decline in business conditions than in the previous month, according to a joint report by Nikkei and IHS Markit.

The 50 neutral mark indicates no change from the previous month, while a reading below 50 indicates contractions and above 50 points to an expansion.

Manufacturers also continued to scale back their purchasing activity and inventories of both purchases and finished goods, albeit in each case to lesser extents than in April.

Supply-chain disruption due to Covid-19 remained a key feature of the survey in May, with vendor delivery times lengthening markedly again. Panelists reported particular difficulty in securing imported items.

vietnams manufacturing activity improved in may
(Photo: IHS Markit)

The scarcity of some materials placed some upwards pressure on input costs during the month. Input prices decreased for the second month running, but only marginally. Where a fall in input costs was recorded, respondents often linked this to lower oil prices.

With Covid-19 brought under control in Vietnam, there was tentative optimism among manufacturers that production would increase over the coming year. This followed a negative outlook in the previous month. That said, sentiment was still the second-lowest since the question was added to the survey in April 2012 amid concerns that the impacts of the pandemic will linger.

“The success Vietnam has had in bringing the Covid-19 outbreak in the country under control means that the economy can begin along the road to recovery. That said, the PMI data for May suggest that the road will be a long one, with the manufacturing sector remaining in contraction mode midway through the second quarter of the year, albeit the decline was much softer than the record seen in April,” said Andrew Harker, associate director at IHS Markit, which compiles the survey.

vietnams manufacturing activity improved in may
The industry wide production index in May increased 11.2% (Photo: Diginet)

“The return to growth will likely be gradual, with little support coming from export markets in the near-term at least as the pandemic continues to affect large parts of the world," he added

The industry-wide production index (IIP) in May 2020 reached an increase of 11.2% over the previous month, although it still decreased by 3.1% compared to the same period in 2019.

In which, mining industry decreased by 13%; processing and manufacturing sector decreased by 2.4%; electricity production and distribution increased by 2%; water supply and waste treatment, wastewater increased by 2.3%.

For the first 5 months of the year, IIP is estimated to increase by 1% over the same period last year, much lower than the 9.5% increase of the same period in 2019. Of which, the manufacturing and processing industry increases 2.2 %; power production and distribution increased by 2.6%; water supply, waste management and waste treatment increased by 2.9%; particularly, the mining and quarrying decreased by 8.1%, reducing 1.3 percentage points.

vietnams manufacturing activity improved in may
Some industries saw a sharp decrease or a very low increase in the first 5 months (Photo: Bizlive)

Some industries saw a sharp decrease or a very low increase in the first 5 months of the year, including: support services for mining decreased by 36.5%; repair, maintenance and installation of machinery and equipment decreased by 16.4%; production of motor vehicles decreased by 16.3%; production of motors and motorcycles decreased by 15.6%; beverage production decreased by 14.6% ...

Besides, a number of industries with a 5-month production index increased significantly over the same period last year, including: Manufacture of medicines, pharmaceutical chemicals and medicinal materials increased by 25.9%; production of coke and refined petroleum products increased by 12.9%; paper increased by 9.3%; production of chemicals increased by 9.1% ...

Some key industrial products in the 5 months decreased sharply and increased low over the same period last year, including: cars, down 26.9%; beer decreased by 24.5%; motorbike reduced by 15.6%; crude oil production decreased by 13.7%; textiles made from artificial fibers down 11.4%; natural gas decreased by 10.4%; crude iron and steel decreased by 9.7%; casual wear decreased by 8.2%...reported by VGP News.

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Candy Lee