In a report releasedon December 1, IHS Markit said overall business conditions in the Vietnamesemanufacturing sector improved for the second month running in November, butrenewed worries about the COVID-19 pandemic and associated labour shortageslimited growth momentum. Meanwhile, inflationary pressures continued tostrengthen, with both input costs and output prices increasing to the greatestextents since April 2011.

According to thereport, new orders increased for the second month running as the easing ofpandemic restrictions in recent months helped raise demand in the sector.Moreover, the rate of expansion was solid and the sharpest since April. Newexport orders also increased again, but only modestly as COVID-19 continued toconstrain international trade.

Higher new orders anda lower level of restrictions than seen earlier in the year meant thatmanufacturers were able to expand their production volumes again in November.While new order growth accelerated, this was not the case for output whichincreased at a broadly similar pace to that seen in October.

A number of firmsindicated that labour shortages had restricted production. A number ofrespondents indicated that workers were concerned about the pandemic andtherefore were reluctant to return to work, thereby making it difficult formanufacturers to expand staffing levels in line with greater workloads.Employment continued to fall markedly, extending the current sequence ofreduction to six months. As a result, backlogs of work increased for the thirdmonth running.

Worries about thepandemic also impacted confidence among manufacturers, with sentiment droppingfrom October. That said, firms remained optimistic that output will increaseover the coming year amid hopes that the health situation will improve.

According to thereport, higher oil and transportation costs, as well as raw material shortages,contributed to a further increase in input prices in November. Moreover, therate of inflation accelerated for the third month running and was the steepestsince April 2011. The same was also true for output charges, which rose at amuch faster pace than in October as firms passed on higher costs to theircustomers.

Manufacturers expandedtheir purchasing activity for the second successive month in November, albeitat a reduced pace. Despite the increase in input buying, stocks of purchasesdeclined for the first time in four months. Respondents indicated that the useof inputs to support production and issues securing materials were behind thedrop.

The challenges insecuring inputs were highlighted by data signalling a further markedlengthening of suppliers' delivery times. Raw material shortages, a lack ofshipping capacity and issues with transportation due to the COVID-19 pandemicall contributed to delivery delays. That said, the latest deterioration was theleast marked in six months./.