Vietnam PMI September 2021 – manufacturing purchasing managers index

Backlogs of work surge amid restrictions on
production volumes

  • The fastest rise in backlogs on record as output falls sharply again.
  • Staffing levels decline at a record pace.
  • Unprecedented supply-chain disruption continues.

Cimigo market research has collected the Vietnam PMI – manufacturing purchasing managers index since 2013. The Vietnam PMI is compiled by IHS Markit from responses to monthly questionnaires sent to purchasing managers in a panel of around 400 manufacturers.

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Vietnam PMI findings

Vietnam Purchasing Managers Index (PMI) September 2021

The Vietnamese manufacturing sector saw a further sharp fall in production during September as the sector continued to be severely impacted by the current wave of the COVID-19 pandemic in the country and the restrictions put in place to try and contain the spread of the virus. New orders were also down sharply and the rate of decline in staffing levels accelerated. 

The sustained period of restricted production fed through to a record rise in backlogs of work. Meanwhile, travel restrictions and ongoing international supply chain disruption resulted in the worst delays for the receipt of inputs on record and contributed to a further sharp increase in input costs. Meanwhile, firms were only able to raise their own selling prices at a slight pace amid weak demand. 

The Vietnam Manufacturing Purchasing Managers’ Index™ (PMI®) remained at 40.2 in September, signalling a further marked deterioration in business conditions across the sector. Temporary business closures, transportation difficulties and staff shortages all contributed to a fourth successive reduction in manufacturing output in Vietnam, and one that remained considerable. 

New orders also fell sharply, and to the greatest extent since April 2020. Alongside a sharp reduction in domestic new business, firms pointed to a much sharper reduction in new export orders than that seen during August. Employment levels decreased at the sharpest pace since the survey began in March 2011. Some panellists reported that employees had resigned due to a lack of work, while others scaled back staffing levels amid pauses in production. The sustained period of restrictions on output and sharply falling staffing levels led to a surge in backlogs of work. Outstanding business rose for the first time in four months, and at a pace, that was by far the strongest in the survey’s history. 

Vietnam September 2021 Purchasing Managers Index (PMI) Trend

As well as lowering staffing levels, manufacturers also reduced their purchasing activity in response to lower production requirements. Meanwhile, supply-chain delays intensified, with lead times lengthening at a new record pace for the third consecutive month. Issues with the supply of raw materials contributed to further upward pressure on purchase prices, while there were widespread reports of higher transportation costs. As a result, input prices continued to rise sharply, with the rate of inflation slightly faster than in August.

On the other hand, selling prices rose only slightly, and at the weakest pace since June. Firms indicated that weak demand meant they offered discounts in order to try to secure sales. Restricted production volumes impacted inventory holdings. Inventories of purchases rose as inputs were kept in stock rather than being used in production. In turn, falling output meant that stocks of finished goods continued to decrease.

Firms generally expect output to recover over the coming year, with production set to start rising during the final quarter of 2021 should the pandemic be brought under control and restrictions lifted. Business sentiment picked up from the 15-month low seen in August, but remained relatively muted. 

Approach

The IHS Markit Vietnam Manufacturing PMI® is compiled by IHS Markit from responses to monthly questionnaires sent to purchasing managers in a panel of around 400 manufacturers. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP.

Survey responses are collected by Cimigo Vietnam in the second half of each month and indicate the direction of change compared to the previous month. A diffusion index is calculated for each survey variable. The index is the sum of the percentage of ‘higher’ responses and half the percentage of ‘unchanged’ responses.

The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease. The indices are then seasonally adjusted.

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