The Vietnam Manufacturing Purchasing Managers' Index (PMI) rose to 53.9 in May from 52.7 in April, with a record rise in new export orders, according to a report in the Nikkei Asian Review.
A reading above 50 is a signal of improvement, while one below 50 points to a slowdown in manufacturing activity.
New orders rose at a sharper rate than in April, pushed on by a record expansion in new export business. Growth of output and employment also picked up. Business conditions have now strengthened on a monthly basis throughout the past two and a half years.
Andrew Harker, Associate Director at IHS Markit said, "A record rise in new export orders is the key highlight from the latest PMI, helping to drive growth across the sector."
Harker also pointed out that output price inflation continued to ease as companies often favored holding down prices to help secure sales rather than passing on sharp rises in input costs.
Meanwhile, in the first five months of the year, Vietnam earned US$15.6 billion from exporting agro-forestry-aquaculture products, up 9.9% against the same period last year, according to statistics from the Ministry of Agriculture and Rural Development.
Moreover, the rate of expansion was rapid and the fastest in 14 months. The increase in overall new orders was supported by the strongest rise in new business from abroad since the survey began in March 2011. With new orders increasing, firms raised output accordingly.
Production grew at a solid pace, the fastest expansion in three months. Output increased across all three broad sectors, with growth strongest in investment goods.
In line with greater numbers of new orders and output requirements, manufacturers increased their staffing levels at a swifter pace in May. The rate of job creation was the highest since January.
Suppliers’ delivery times continued to lengthen at a marginal pace during May, with respondents often linking delays to raw material shortages.
Alongside faster increases in output and new orders, business confidence picked up in May. More than 52% of respondents expect a rise in production over the coming year, with confidence mainly linked to predictions of further growth in new orders.
Dr Bui Quang Tin from the Banking University of HCM City said the PMI has been on the increase since the beginning of 2018 and is returning to period of growth like that of early 2017.
Mr Tin predicted that PMI would continue to rise in the coming months based on factors such as the momentum of growth over the first five months, and State policies which help simplify administrative formalities and increase flexibility in businesses activities.
Source: Nikkei Asian Review