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HSBC Vietnam Purchasing Managers’ Index

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HSBC Purchasing Managers’ Index™ 2015

HSBC Vietnam Purchasing Managers’ Index™ (PMI™)

The HSBC Vietnam Manufacturing Purchasing Managers’ Index™ (PMI™) is a composite indicator designed to provide an overall view of activity in the manufacturing sector and acts as a leading indicator for the whole economy. The indicator is derived from individual diffusion indices which measure changes in output, new orders, employment, suppliers’ delivery times and stocks of goods purchased. A reading of the PMI™ below 50.0 indicates that the manufacturing economy is generally declining; above 50.0, that it is generally expanding. A reading of 50.0 signals no change. The greater the divergence from 50.0, the greater the rate of change signalled by the index. Purchasing Managers’ Index™ and PMI™ are either registered trade marks of Markit Economics Limited or licensed to Markit Economics Limited. HSBC use the above marks under licence. Markit is a registered trade mark of Markit Group Limited.

HSBC Vietnam Purchasing Managers’ Index™ (PMI™)

HSBC Vietnam Manufacturing PMI™Sharpest rise in output in four years

April PMI data pointed to a solid improvement in business conditions in the Vietnamese manufacturing sector as improving client demand led to stronger rises in output and new orders. Higher production requirements led to increases in both employment and purchasing activity. Meanwhile, further falls in both input costs and output prices were recorded, although in each case rates of reduction eased.The headline seasonally adjusted Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – rose to 53.5 in April from 50.7 in the previous month, thereby signalling a solid strengthening of operating conditions. Moreover, the improvement was the strongest since the series began in April 2011. Business conditions have now strengthened in each of the past 20 months.Driving the overall improvement in business conditions was a sharp increase in new business as a number of firms reported having secured new customers. The rate of expansion was the sharpest in the series history. This was also the case with regards to new business from abroad, where growth was solid.Higher new orders led to a nineteenth successive monthly increase in manufacturing production, with the rate of expansion quickening to the fastest since April 2011. Growth of output resulted in a further reduction in backlogs of work as firms reported efforts to complete orders quickly. That said, the rate of depletion was the weakest in the current four-month sequence of

falling outstanding business.

Manufacturers took on extra staff in order to help meet production requirements in April. The modest rise in employment followed a decrease in the previous month.

As has been the case in each month since last November, input costs decreased. Panellists reported lower costs for materials including oil, iron and steel, while some respondents had requested price reductions from suppliers. The latest fall in input costs was the slowest in five months. Decreasing input prices was the main factor behind a further reduction in charges at Vietnamese manufacturing firms. That said, the rate of decline eased for the third month running.

Suppliers’ delivery times lengthened for the second month in a row amid reports of material shortages at vendors. That said, the rate of deterioration in lead times was only marginal as prompt payments led some suppliers to quicken their deliveries.

Increases in new business led to a sharp rise in purchasing activity during April. Input buying has now risen in each of the past 20 months, with the latest expansion the strongest since April last year. This rise in purchasing led to an accumulation of pre-production inventories, the first in four months.

Stocks of finished goods also increased, following a decline in the previous month. Some panellists reported that finished products were awaiting delivery to clients.

Key findings:• Sharp growth of production• Record rise in new business• Input costs continue to fall

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HSBC Vietnam Manufacturing PMI™

Output IndexQ. Please compare your production/output this month with the situation one month ago.

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New Orders IndexQ. Please compare the level of new orders received (Vietnam and export) this month with the situation one month ago.

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New Export Orders IndexQ. Please compare the level of new export orders received this month with the situation of one month ago.

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Backlogs of Work IndexQ. Please compare the level of outstanding business in your company this month with the situation one month ago.

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Vietnamese manufacturing output rose sharply during April. Moreover, the rate of expansion was the fastest since April 2011. Production has now increased in each of the past 19 months. Where output rose, panellists mainly linked this to growth of new orders amid improvements in customer demand.

Stronger client demand was also mentioned by those firms seeing a rise in new business during April, with a number able to secure new customers over the month. New orders increased for the eighth successive month, and the rate of expansion quickened to the strongest in the history of the survey which began in April 2011.

New export orders also increased at a series-record pace during April, surpassing the previous best seen in April 2014. New business from abroad has now risen in seven of the past eight months. Around 31% of respondents signalled an expansion of new export orders, against 15% that posted a contraction.

Backlogs of work at Vietnamese manufacturing firms decreased for the fourth successive month in April, despite a sharp increase in new orders. That said, the rate of depletion was the weakest in this sequence. Some panellists reported having made efforts to complete work quickly in an attempt to avoid an increase in outstanding business.

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Stocks of Finished Goods IndexQ. Please compare your stocks of finished goods (in units) this month with the situation one month ago.

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Employment IndexQ. Please compare the level of employment at your unit with the situation one month ago.

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Output Prices IndexQ. Please compare the average price that you charge per unit of output (volume weighted) this month with the situation one month ago.

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Increasing rate of deflation

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Input Prices IndexQ. Please compare the average price of your purchases (volume weighted) this month with the situation one month ago.

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Stocks of finished goods increased in April, after having decreased in the previous month. Although modest, the rate of accumulation was the strongest in eight months. According to respondents, post-production inventories had risen as some finished products awaited delivery to customers. Close to 22% of panellists reported higher stocks of finished goods, against 18% that signalled a fall.

April data pointed to a modest increase in employment at manufacturing firms in Vietnam. This followed a decrease in the previous month and was the seventh instance of job creation in the past eight months. Where staffing levels were raised, this was linked by panellists to higher production requirements amid new order growth.

As has been the case in each month since October 2014, output prices in the Vietnamese manufacturing sector decreased in April. That said, the pace of reduction eased for the third month running to the slowest in six months. Respondents mainly attributed lower output prices to declines in material costs. Meanwhile, some panellists reported that the recent weakness of the euro meant that they had to reduce their prices in the eurozone in order to remain competitive.

A sixth consecutive monthly decline in input costs was recorded during April. According to panellists, falling prices in world markets for items such as oil, iron and steel had been behind the latest reduction. There were also reports of companies requesting price cuts from suppliers. However, the rate of decline eased for the third month running.

Suppliers’ Delivery Times IndexQ. Please compare your suppliers’ delivery times (volume weighted) this month with the situation one month ago.

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Stocks of Purchases IndexQ. Please compare your stocks of purchases (in units) with the situation one month ago.

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Quantity of Purchases IndexQ. Please compare the quantity of items purchased (in units) this month with the situation one month ago.

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The Purchasing Managers’ Index is based on data compiled from monthly replies to questionnaires sent to purchasing executives in around 400 manufacturing companies. The panel is stratified geographically and by Standard Industrial Classification (SIC) group, based on industry contribution to Vietnam GDP. Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month. For each of the indicators the ‘Report’ shows the percentage reporting each response, the net difference between the number of higher/better responses and lower/worse responses, and the ‘diffusion’ index. This index is the sum of the positive responses plus a half of those responding ‘the same’.

The Purchasing Managers’ Index™ (PMI™) is a composite index based on five of the individual indexes with the following weights derived from the Chartered Institute of Purchasing & Supply’s survey of the UK economy: New Orders - 0.3, Output - 0.25, Employment - 0.2, Suppliers’ Delivery Times - 0.15, Stock of Items Purchased - 0.1, with the Delivery Times index inverted so that it moves in a comparable direction.

Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change. An index reading above 50 indicates an overall increase in that variable, below 50 an overall decrease. Markit do not revise underlying survey data after first publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series.

Notes on the Data and Method of Presentation

The intellectual property rights to the HSBC Vietnam Manufacturing PMI™ provided herein are owned by or licensed to Markit Economics Limited. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without Markit’s prior consent. Markit shall not have any liability, duty or obligation for or relating to the content or information (“data”) contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers’ Index™ and PMI™ are either registered trade marks of Markit Economics Limited or licensed to Markit Economics Limited. HSBC use the above marks under license. Markit is a registered trade mark of Markit Group Limited.

Warning

Suppliers’ delivery times lengthened for the second successive month in April, although the rate of deterioration in vendor performance was only marginal and weaker than seen in March. Where lead times were reported to have lengthened, this was attributed to material shortages at suppliers. On the other hand, some panellists mentioned that quick payments and company requests had led to shorter delivery times.

Increased input buying led to an accumulation of stocks of purchases during April, ending a three-month sequence of declining pre-production inventories. That said, the increase was only slight as some firms used stocks in the production process. More than 22% of respondents signalled a rise in stocks of purchases, compared with 15% that registered a fall.

Vietnamese manufacturing firms increased their purchasing activity during April, extending the current sequence of expansion to 20 months. Moreover, the rate of expansion was solid, having accelerated to the fastest since April last year. The main reason for the latest rise in input buying was increased new business.

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