HCMC – Purchasing Managers’ Index (PMI), a gauge of business conditions in the manufacturing sector, has been revealed in Vietnam for the first time.
The April PMI of Vietnam was announced at a press briefing in HCMC on Tuesday, and the index from now on will be publicized monthly by HSBC Vietnam.
PMI is one of the indicators that measure the health of an economy, along with the index of industrial production (IIP), gross domestic product (GDP) and business insight survey. The Vietnam Business Insight Survey (VBiS) is currently conducted by the Vietnam Chamber of Commerce and Industry (VCCI) on a quarterly basis.
PMI is made up of five sub-indices, namely production level, new orders from customers, speed of supplier deliveries, inventories and employment. The index above 50 points shows improvement in business conditions, while that below 50 points indicates decline.
“This is a necessary database to promptly provide the indicators of market changes to economic analysts, financial market participants and organizations such as banks so that they can set appropriate interest rates,” said Pham Hong Hai, deputy general director of HSBC Vietnam.
At the press briefing on Tuesday, HSBC unveiled that Vietnam’s PMI had dropped from 50 points in March to 49.5 points in April. This signals a worsening business environment for local manufacturers, following the stagnation in the previous surveys.
Trinh Nguyen, an economic expert at HSBC, said: “The indices of six out of the last seven months show that business conditions were deteriorating and hit the bottom in February. The general business conditions of April are deteriorating due to the poor production output, stunting the growth in new orders.”
The results of the April PMI survey indicate a slight drop in the production level of the manufacturing sector, versus the growth trend in March. Still, the decrease rate of April is lower than in the beginning of the year, mainly owing to the new export orders and the completion of order backlogs.
For the first time since November 2011, local producers achieved an increase in new export orders. Stronger export demand created a motivation for growth in April as the number of new export orders finally improved after three gloomy months.
Also this April, the manufacturing sector recorded the fastest growth in the volume of new export orders since the PMI survey was first conducted in Vietnam in April last year. Local companies said export to China is on the rise and the recovery in sales volume in Japan has made up for the sluggish demand in Western Europe.
Trinh Nguyen noted that Vietnamese manufacturers were still cautious of their unsold products. Effort to reduce inventories is based on the need to tighten control on working capital and avoid storing up unnecessary items.
Management of storage facilities has also become favorable thanks to shorter delivery time. Prices of goods and services heavily dependent on fuels, especially transport, continued to surge in April, pushing up the average expense.
However, in March, input cost increases cooled down for the first time in ten months. Meanwhile, factory prices stayed low and enterprises said the tough competition for new orders only pushed up selling prices steadily.
“We hope PMI will become a useful forecast tool for economic research activities in Vietnam, and we believe the index will help investors map out the optimal strategies,” said Sumit Dutta, general director of HSBC Vietnam.
PMI survey of HSBC has been carried out in 36 nations worldwide and the key economic regions like the euro zone. This is one of the surveys that attract the most attention as it monthly provides updated, accurate and unique indicators of economic trends.
HSBC has joined hands with Markit Economics, a global financial information services provider, to conduct PMI surveys in 18 countries.
Vietnam’s PMI is established on the data collected from the purchasing managers at 400 manufacturing enterprises in Vietnam. Markit Economics has done the survey on behalf of HSBC since April 2011, to timely give forecasts on business conditions for local manufacturers.
The Saigon Times Daily
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