Vietnam’s
manufacturing slowdown continued for the third month in a row in June despite
distinct reductions in output prices due to weaker demand and falling raw
material costs, said a report from the Hong Kong – Shanghai Banking Corp
(HSBC).
The slowdown was highlighted by a drop from 48.3 in May
to 46.6 in June in the seasonally adjusted HSBC Vietnam Manufacturing
Purchasing Managers’ Index (PMI).
The PMI dropped from 49.5 in April to 48.3 in May, its lowest
level for three months, and from 50.0 in March to 49.5 in April, signaling that
overall business conditions worsened slightly over the month, following
stagnation during the previous survey period.
The latest PMI data pointed to further worsening of business
conditions across the Vietnamese manufacturing sector, and was the sharpest
decline since February, said the report compiled by HSBC-appointed partner,
Markit.
The index has now posted below the neutral 50.0 value for
three months running, beginning in April.
Worsening situations
The overall deterioration in business conditions
reflected a marked decline in new order intakes in June, said the report.
Incoming new business fell for the second successive
month at the same high rate as was seen in May, both of which were the fastest
since the survey began in April 2011.
Anecdotal evidence widely suggested that the global
economic slowdown had resulted in a squeeze on spending among clients.
The latest data pointed to a marginal reduction in new
export work, which was attributed to softer demand from both developed and
emerging markets.
Lower levels of new orders resulted in reduced production
requirements in June, with output volumes declining for the third consecutive
month, and at the steepest pace since February.
Manufacturers sought to utilize spare capacity in June by
reducing their levels of work-in-hand.
Outstanding business dropped at a rate that tied for the
fastest pace in 15 months of data collection.
Post-production inventory levels increased at a solid
rate in June, reversing the downward trend seen in May.
A number of manufacturers noted that lower-than-expected
sales had resulted in a buildup of unwanted inventory.
This in turn encouraged efforts among firms to alleviate
pressure on working capital by reducing their input buying.
June’s data also signaled a sharp drop in purchasing
activity and a steeper fall in pre-production inventories than was recorded in
May.
Softer demand and lower production levels led to a
decrease in employment numbers in June, thereby ending a three-month period of
net job creation.
Manufacturers mostly noted that lower workforce levels
were achieved by the non-replacement of voluntary leavers, rather than forced
staff departures.
Input, output prices down
Average input costs meanwhile fell for the first time
since January, and at the most marked pace since the survey began in April
2011. Reports from survey respondents frequently mentioned lower oil-related
prices as a major reason behind the lower costs.
Output charges in the manufacturing sector were also
reduced in June, and at a much faster pace than that registered during the
previous month.
“The continued slowdown of manufacturing activity
suggests that businesses continue to face tough operating conditions in
Vietnam. Demand is low both internally and externally,” said Trinh Nguyen, Asia
Economist at HSBC.
“Prices are continuing to decelerate due to low demand
and commodity prices, as indicated by the drop in input prices.”
“The SBV lowered rates in the first half of the year by
400bp to spur spending in Vietnam. This is likely to filter through in the
second half, boosting economic activity,” said Trinh Nguyen.
Global picture
Production in many parts of Asia also weakened in June,
while inflation remains within control.
China’s Manufacturing PMI, as published by the Chinese
government, showed that the indicator slipped to 50.2 from 50.4 last month,
indicating that China's industrial output continued to fall in June.
Meanwhile, China's June PMI, as surveyed by HSBC and
focusing on smaller businesses, fell to 48.2 from 48.4 in May.
The same survey also showed that manufacturing in South
Korea and Taiwan fell into decline after several months of growth.
According to a survey by HSBC, in June, South Korea's PMI
fell to 49.4 from the previous month’s 51, and Taiwan's PMI fell to 49.2 from
50.5 last month.
However, inflation in these countries is declining,
allowing central banks there to apply easing policies to spur growth,
especially in China and Korea, Tim Condon, chief economist at ING Bank Asia,
told The Wall Street Journal.
Korean consumer prices in June rose 2.2 percent over the
same period last year, lower than the 2.4 percent forecast by economists, but
still an increase of 2.5 percent in May.
India and Indonesia are exceptions to the drops in PMI,
as they still resist difficult conditions much better than other Asian
export-led countries thanks to strong domestic demand.
However, Indonesia also runs faster inflation compared to
regional countries, with a 4.53 percent increase in June from 4.45 percent last
month.
HSBC Vietnam
provided the Manufacturing PMI in Vietnam – an early indication of manufacturing
sector operating conditions in Vietnam, for the first time ever on May 8, 2012.
PMIs are among the
most closely-watched surveys in the world and are essential data for economic
analysts, financial market players, and other decision makers such as central
banks that require early indicators of changing market conditions when setting
interest rates, said HSBC.
The HSBC Vietnam
Manufacturing PMI, compiled by Markit, is based on data compiled from monthly
replies to questionnaires sent to purchasing executives at around 400
manufacturing companies.
The survey has been
conducted since April 2011 and provides an early indication of manufacturing
sector operating conditions in Vietnam. The panel is stratified by the Standard
Industrial Classification (SIC) group, and company size is based on industry
contribution to Vietnamese manufacturing GDP.
TuoiTre news
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