January sees a broadly stable picture for Vietnam's manufacturing production (Photo: VNA) According to the latest survey from Nikkei and IHS Markit revealed on February1, although business conditions in the Vietnamese manufacturing sector improvedat the start of 2021, growth was softer than at the end of 2020. Production,employment and purchasing activity were all broadly unchanged in January, whilenew orders increased at a slower rate.
Meanwhile, a lack of shipping containers and raw material shortages meantsevere supply-chain disruption, which in turn contributed to the fastest risein input costs since June 2018.
The survey showed new orders continued to rise, extending the current sequenceof expansion to five months. There were some reports of customers increasingthe size of their orders. That said, the rate of growth eased from December.Meanwhile, new export orders were broadly unchanged, with weakness noted inmarkets where coronavirus (COVID-19) case numbers remained elevated.
January saw a broadly stable picture for manufacturing production. While therise in new orders supported increases in output at some firms, others reportedthat the effects of the COVID-19 pandemic continued to lead to falls inproduction.
The aforementioned increases in size of some orders started to impart pressureon capacity during January. Although backlogs of work decreased for the twelfthsuccessive month, the rate of depletion was the softest in this sequence.
According to the survey, manufacturers kept their workforce numbers broadlyunchanged, following a rise in December. Some firms raised employment inresponse to higher new orders, while others noted a reduction amid the pandemicand staff resignations. Purchasing activity was also little changed.
Efforts to secure inputs were stymied by severe disruption to supply chainsagain in January. In fact, the extent of the latest lengthening of deliverytimes was the greatest for almost a decade, except for during the worst of theCOVID-19 lockdowns in March and April last year. Firms often reported a lack ofshipping containers, as well as shortages of raw materials.
Issues with shipping and raw material supply added to inflationary pressures.The rate of input cost inflation quickened for the fifth month running and wasthe fastest since June 2018.
Output prices, meanwhile, increased for the fifth successive month, albeit at amodest pace that was much weaker than that seen for input costs.
Efforts to guard against raw material price rises led firms to increase theirstocks of purchases, the second month running in which this has been the case.
On the other hand, stocks of finished goods decreased, and to the greatestextent in five months.
Although manufacturers remained confident regarding the 12-month outlook,sentiment dipped to a five-month low amid concerns about the ongoing effects ofCOVID-19. Where firms were optimistic, this reflected hopes for a reducedpandemic impact and plans for investment and production expansions.
“The Vietnamese manufacturing sector struggled to gain momentum at the start of2021, as the ongoing effects of the COVID-19 pandemic and substantialdisruption to supply chains hampered operations. The data suggest that whilethe Vietnamese economy remains one of the better performers globally, there aresignificant headwinds that could prevent a return to the stellar growth ratesseen pre-pandemic in the near-term at least," Andrew Harker, EconomicsDirector at IHS Markit, said./.
VNA
