The headline Nikkei Vietnam Manufacturing Purchasing Managers’ Index (PMI), a composite single-figure indicator of manufacturing performance, dipped to 51.7 in October from 52.9 in the previous month.

 

Nevertheless, the health of the sector has now strengthened in each of the past 11 months, the report said.

 

Key to the latest improvement in business conditions was a further pick-up in new orders at Vietnamese manufacturers amid reports of rising client demand in both domestic and export markets. Moreover, the rate of growth in total new business quickened to a four-month high.

 

Despite a solid increase in new orders, firms saw production levels broadly stabilize, thereby ending a 10-month sequence of growth. Falls in output were seen in the intermediate and investment goods sectors, but consumer goods production increased.

 

Andrew Harker at IHS Markit, which compiled the survey, said while output growth paused in the Vietnamese manufacturing sector during October, a number of other series from the latest PMI survey were broadly positive, suggesting the stabilization of output may just be a temporary blip.

 

Firstly, new order growth picked up to a four-month high as firms reported improving client demand. In addition, firms ramped up their purchasing activity in order to support a record increase in stocks of purchases as manufacturers prepared for future production. IHS Markit is forecasting a rise in gross domestic product (GDP) of 6% in 2016.

 

The combination of higher new orders and a marginal dip in production led to an increase in backlogs of work in October. The rise was the first in seven months.

 

Manufacturers continued to raise employment, extending the current period of job creation to seven months. The latest increase was weaker than the previous month’s five-and-a-half year high.

 

Firms again displayed a preference for inventory building in October, with stocks of purchases rising at the fastest pace in the survey’s history. This accumulation was facilitated by a sharp and accelerated expansion of purchasing activity during the month.

 

Stocks of finished goods also increased, the second month running in which this has been the case. Moreover, the latest rise was the fastest since May 2015.

 

The rate of input cost inflation remained broadly in line with that seen in September as some panelists commented on higher prices in raw material markets.

 

A number of respondents passed on increased input prices to clients, thereby resulting in a second consecutive monthly rise in output prices. Moreover, the rate of charge inflation was the fastest in 28 months.