Hanoi (VNS/VNA) – Vietnam’s Manufacturing Purchasing Managers’ Index(PMI) in February fell for the third month in a row to 51.2, according to thelatest reports from Nikkei and IHS Markit.

Though the index was down from 51.9 in January and the lowest since March 2016,it remained above the critical 50-point threshold that separates expansion fromcontraction in manufacturing output.

According to the report, while both output and new orders rose at sharper ratesin February, the headline index was pulled down by reductions in employment andstocks of purchases.

“International demand weakness held back the Vietnamese manufacturing sector inFebruary. New export orders rose at the slowest pace in over three years andsigns of softening demand led firms to scale back employment,” Andrew Harker,associate director at IHS Markit, which compiles the survey, said.

The report showed that the decline in staffing levels was the first in almostthree years as manufacturers responded to relatively weak new order growth inrecent months. The reduction represented a marked turnaround from a record paceof job creation in November 2018.

“Although new orders continued to rise, and at a faster pace than in January,the latest expansion was much slower than those seen towards the end of 2018.The rate of expansion in new export orders, meanwhile, eased to a 37-monthlow,” it said.

Production growth quickened in February and was solid, but the latest rise wasbelow the average seen across 2018. Where output increased, panellists reportedthat customer demand had improved.

According to the report, despite cutting back on staffing levels, Vietnamesemanufacturers were again able to reduce their backlog of work as new ordergrowth remained relatively weak. In fact, outstanding business decreased to thegreatest extent in almost a year.

Stocks of purchases fell for the first time in 11 months, in spite of continuedgrowth of purchasing activity. Stocks of finished goods increased, albeit tothe least extent in the current five-month sequence of accumulation. Somepanellists reported raising inventory holdings in line with expectations offurther new order growth, but others indicated that softer rises in new work inrecent months had led to an accumulation of unsold products.

Manufacturers registered a slight rise in input costs for the second monthrunning in February, with the rate of inflation well below the series average.With cost burdens increasing only modestly, there remained a lack of pressureon firms to raise selling prices. Output prices were lowered for the fifth timein the past six months as part of efforts to attract new business in a softerdemand environment.

Manufacturers remainedoptimistic that output would increase over the coming year, with confidencefuelled by expected improvements in market demand and new order growth. Thatsaid, sentiment eased to a four-month low and was below the series average.

“The sector remained in growth territory, however, with Vietnamesemanufacturers able to secure greater volumes of new work despite currentchallenges,” Harker said.-VNS/VNA