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Manufacturing industry continues to recover

Output picked up again as the Covid-19 wave subsided, but new order growth slowed as some customers hesitated at the sharp rise in prices.

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

In April, Vietnam’s manufacturing PMI stood at 51.7 points, unchanged from the previous month, when business conditions improved for seven consecutive months.

“The rapid decline in Covid-19 cases in Vietnam helped output and employment rebound in April as business conditions became more normal,” said Andrew Harker, chief economist at S&P Global. , said. This leads to hope that the manufacturing sector will sustain a period of recovery and growth.

Vietnam's manufacturing PMI in April was at 51.7 points, equivalent to March. Photo: S&P Global

Vietnam’s manufacturing PMI in April was at 51.7 points, equivalent to March. Photo: S&P Global

According to the survey of S&P Global, both output and employment rebounded in April after falling in March. In both metrics, companies benefited from a decline in Covid-19 cases after peaking in March. The improved pandemic situation has allowed employees to return to work, while there are many reports of new hiring activity. In fact, the pace of job creation hit a one-year high.

Increased production capacity helps companies increase output and take advantage of growing customer demand. Output has increased for the sixth month in the past seven months.

However, the pace of growth in new orders has slowed, with the lowest margin in the seven-month growth period. According to those surveyed, rising prices and scarce raw materials have limited the momentum of orders. A similar situation occurs with the number of new export orders when the growth rate of this index also slows down. In the case of exports, restrictions due to the complicated developments of Covid-19 in China are part of the reason for the slowdown in growth.

Slower growth of new orders and an increased workforce have helped companies handle their workloads and have been able to reduce their backlogs for the first time in three months.

On the production cost side, input costs continued to increase sharply. The items reported to increase prices are freight, gas, and gasoline. To compensate, manufacturers have increased their selling prices, and the rate of price increase is the fastest in the past five months.

Delivery time also continued to be extended, influenced by the Covid-19 situation in China and tensions in Ukraine. However, the extent of delivery times has fallen to the lowest level in a year as the pandemic situation in Vietnam has improved.

Raw material supply problems also contributed to the drop in inventory purchased in April for the first time in four months. In fact, input purchases increased faster than in March and survey respondents attributed the increase to an increase in new orders.

Finished goods inventories also decreased and survey team members attributed the decrease to the use of inventory to meet sales requirements.

Minh Son

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