Cautionary stockpiling of product by customers helped drive Vietnam's manufacturing-sector expansion into its 11th-straight month, S&P Global reported Monday.
The Vietnam manufacturing purchasing managers index (PMI) rose to 52.8 in May, up from 50.5 in April, and striking further above the 50-mark that separates growth from contraction, reported S&P Global, citing its monthly survey.
The nation's manufacturing PMI in May reached its highest level since February, "just before the outbreak of war in the Middle East," due in part to "safety stock building among customers amid worries of the effects of a prolonged conflict in the Middle East."
However, Vietnam's factory managers in May faced the sharpest rise in business operating costs since early 2011, due in part to fallout from the Persian Gulf turmoil. "Fuel, oil and transportation were the main drivers of higher input costs, according to respondents," advised S&P Global.
Given recent undulations in demand and the global economy, and surplus capacity, Vietnam's industrial managers modestly reduced payrolls in May.
"Evidence of spare capacity was a factor behind a further reduction in manufacturing employment, which decreased for the third time in as many months. The rate of job shedding was only marginal, however," explained S&P Global.
In addition, in May, there were some reservations about the sturdiness of demand for manufactured product.
At "least some of the growth in May driven by stockpiling efforts amid the disruption caused by the war. There is some question therefore as to the sustainability of this upturn," said S&P Global.
Nevertheless, Vietnam's factory managers were more confident in May about the next year than in preceding months, but the overall outlook was still soft. "Sentiment remained relatively muted, however, reflecting concerns about the ongoing impact of the war in the Middle East," said S&P Global.
The Vietnam manufacturing PMI was compiled by S&P Global surveys sent to 400 manufacturers from May 12 through May 20.
