Manufacturing PMI inches up in August

 

The Nikkei manufacturing Purchasing Managers’ Index (PMI) climbed up from July’s 51.9 to 52.2 in August, reflecting a modest improvement in the operating conditions in the manufacturing sector. The indicator has remained above the 50-threshold that separates expansion from contraction in business conditions since September 2013, with the exception of two months in late 2015.

August’s result reflects decelerations in production and new business, which were offset by a strong rise in employment. Investment goods producers were able to increase their output, unlike manufacturers of intermediate and consumer goods, who saw their production shrink. To reduce the backlog of work, manufacturers increased the number of employees at the fastest rate since December 2013. Regarding price developments, input costs rose on the back of higher prices for commodities while manufacturers had to decrease their output prices.

According to Andrew Harker at Markit, “the latest PMI data for Vietnam are something of a mixed bag again. The data are generally positive, with rates of expansion in employment and stocks of purchases particularly strong. On the other hand, output and new orders increased at weaker rates, suggesting that client demand is showing signs of softening. Adding to this picture is the fact that firms often had to offer discounts in order to secure new work.”

Focus Economics Consensus Forecast panelists see investment rising 8.9% in 2016, which is unchanged from last month’s forecast. For 2017, the panel expects investment to grow 8.7%.

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Note: Nikkei Purchasing Managers’ Index. Readings above 50 indicate an expansion in the manufacturing sector while readings below 50 point to a contraction.

(September 1, 2016)

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