Vietnam Manufacturing Output Rises for 14th Month

December 5, 2014 Posted by Vietnam Briefing Reading Time: 4 minutes

HCMC – Vietnam’s manufacturing production increased for the 14^th consecutive month in November, recording the sharpest rise in output since April, according to the HSBC Vietnam Purchasing Managers’ Index released on Monday. The month saw output and new orders rise at faster rates, stocks of purchases increase at record pace, and input costs decrease for the first time since December 2012. With the country now reporting a trade surplus of US$2 billion, the Vietnamese manufacturing sector is becoming increasingly competitive.

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The Vietnam Manufacturing PMI rose 1.1 points to 52.1 in November, signaling the most substantial improvement in operating conditions since June. The headline seasonally adjusted HSBC Purchasing Managers Index (PMI) is a composite indicator designed to provide a single figure snapshot of operating conditions in the manufacturing economy. A score of above 50 means expansion is occurring, and a score below 50 means that the sector is contracting.

The record increase in output has been attributed to improvement in client demand, demonstrated by an increase in new business. Competitive pricing and high quality products were identified as the key to attracting new business from both domestic and export markets. “The sharp rise of the PMI index in November reflects our view that the Vietnam manufacturing sector is competitive. Thanks to lower labor costs than China, Vietnam manufacturing is gaining global market share.” Trinh Nguyen, Asia Economist at HSBC commented on the Vietnam Manufacturing PMI survey.

Additional economic highlights revealed by the survey included:

Faster growth of new orders increased backlogs of work to end a six-month trend of declining outstanding business.
Employment rose to satisfy production requirements of increasing new orders.
Attempts to build inventory reserves led to a series-record rise in stocks of purchases.
November was the 15^th successive month of rising purchasing activity by manufacturers.
Input costs decreased for the first time since late 2012 due to falling prices in global commodity markets.

In November, Vietnam’s trade surplus reached US$2 billion, with export revenue rising 13.7 percent from 2013 to reach US$137 billion, according to Vietnam’s General Statistics Office (GSO). The domestic economic sector increased by 13 percent to reach US$44.8 billion and the foreign direct investment sector increased by 14.1 percent to reach US$92.2 billion.

The GSO also reported an Industrial Production Index (IPI) increase of 7.5 percent from 2013. Leading exports saw significant growth, including:

Garments and textiles increased by 18.2 percent
Phones and components increased by 8.3 percent
Footwear products increased by 23 percent
Computers and electronic components increased by five percent

November’s resurgence of growth in Vietnam’s manufacturing sector serves as another indication of the growing dynamism of the country’s economy. Low labor costs, high quality products and increasing integration into the ASEAN community make Vietnam an appealing candidate in the quest for an alternative outsourcing frontier to China. To learn more about the opportunities available in Vietnam’s manufacturing sector for your business, please contact us here.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email vietnam@dezshira.com or visit www.dezshira.com.

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