News » PMI in deterioration zone for seven months

The October Purchasing managers’ Index (PMI) announced by HSBC Vietnam on Thursday is still below the critical 50.0 mark, showing that the local manufacturing sector has suffered deterioration in business conditions for seven months running.

The seasonally adjusted HSBC Vietnam Manufacturing PMI posted 48.7 in October, down from 49.2 in September. Although the contraction rate in October was sharper than in the prior month, it was markedly slower than that signaled in July (which is the steepest in the 19-month series history), says a press release of HSBC.

This is the seventh time that HSBC has unveiled PMI based on the data collected through monthly surveys on operating conditions of Vietnam’s manufacturing sector. The reading above 50.0 points to improvement in business conditions, while that below 50.0 indicates decline.

Manufacturers reported further declines in output and new orders, as demand weakened on the back of a subdued domestic market and reduced global trade flows. Production fell for the seventh month in a row due to the decline in new export orders from clients in China, Japan and Taiwan.

“Weak global and domestic demand continues to weigh on the manufacturing sector; new export orders contracted at the sharpest pace since the series began. The rise of input costs did not help, as manufacturers could not pass off the costs to consumers due to sluggish demand,” said Trinh Nguyen, Asia Economist at HSBC.

“The output index level, although still signaling contraction, is stabilising at close to fifty suggesting that the economy will likely recover towards the end of the fourth quarter of 2012,” she added.

The downturn in the manufacturing sector continued to influence levels of purchasing activity and inventory holdings during October. Reduced production requirements meant input buying volumes were cut back sharply and to a greater extent than during the prior survey period.

Stocks of purchases subsequently dropped for the twelfth consecutive month and at the fastest pace since July.

Inventories of finished goods were broadly unchanged for the fourth straight month, as input costs continued to rise. Average purchase prices rose for the third month in a row, reflecting higher costs for foodstuffs, fuels and transportation.

Meanwhile, average output prices dipped for the sixth straight month. “The pace of charge deflation remained solid, but was noticeably less marked than the severe rates seen during June and July of this year,” says the press release.

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