Vietnam manufacturing up amidst Asian recovery

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Workers at a yarn weaving plant of the Ha Nam Textile Company south of Hanoi

Manufacturing activity rebounded in Vietnam after a long contraction due to strong domestic demand and new data across Asia also showed improvement.

The manufacturing purchasing managers' index (PMI) released Monday by HSBC and Markit Economics climbed to 50.5, the highest level in 14 months, from 48.7 in October. The gauge covers around 400 companies. An index below 50 indicates a contraction.

"The improvement in operating conditions reflected returns to growth in both production levels and new orders during November. Output increased at the most marked pace since September 2011, thereby ending a seven-month period of contraction," HSBC said in a statement.

"Support to production levels was mainly provided by domestic demand in November, as new export order volumes continued to decline," the bank said.

"The rebound of manufacturing activity is anticipated and much-needed. The expansion is supported by stronger credit growth as well as relatively benign inflation, while export demand remains weak," said Trinh Nguyen, an economist with the British bank.

"Looking ahead, we expect a gradual pick-up of economic activity supported by both domestic demand and a gradual recovery in China," she said.

Factory activity across Asia broadly picked up in November, with China adding to the improvement seen in the previous month, giving rise to hopes that the region is beginning to rebound from its recent slumber.

The latest batch of PMI figures from HSBC showed manufacturing activity in China hit a 13-month high, while India also saw its strongest expansion since June.

The news comes despite the debt crisis in Europe, a key market for many of Asia's exporting nations, which has seen demand slump. Analysts have also warned of similar impacts if US lawmakers do not agree a deal to avert the so-called fiscal cliff.

China's PMI hit 50.5 last month up from 49.5 in October, putting it above the 50 mark. Economic growth hit more than three-year low of 7.4 percent in the third quarter from July to September but recent data have fueled optimism that the worst is over.

Tang Jianwei, a Shanghai-based economist for the Bank of Communications, tipped conditions to further improve next year.

"Next year the economic outlook will be better, especially with the coming of the Chinese New Year when demand will increase. We will likely see steady improvement in PMI in the next few months," he said.

There was some cheer for India, which continues to struggle with a debilitating slowdown, with HSBC's PMI climbing to a seven-month high of 53.7 in November, from 52.9 in the previous month.

While the latest data indicate Asia looks to be emerging from its slump, analysts said there could still be headwinds from the US fiscal cliff of tax hikes and spending cuts due to take effect from January 1.

If the measures do come in, there is a broad consensus that they will tip the US economy back into recession, which would reverberate across the world.

Song Seng Wun, a regional economist with Malaysian bank CIMB, told AFP the improvements were driven by demand for consumer goods such as smartphones and tablets ahead of Christmas, and stimulus measures were also providing some support.

"After that, we'll see what happens because the US government might shut down," he said, referring to the fiscal cliff.

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