Vietnam sees weakest manufacturing data in 16 months

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Employees work at a truck factory in Vietnam's northern province of Hung Yen

Manufacturing activity in Vietnam continued to contract in July as output and new business levels declined at the fastest rates in 16 months, new data showed.

The manufacturing purchasing managers' index (PMI) released Wednesday by HSBC and Markit Economics fell to 43.6 from 46.6 in June. The gauge, which covers around 420 companies, has posted below the neutral 50 value for four months in a row.

The latest reading was the lowest since the monthly survey began in April 2011. An index below 50 indicates a contraction.

"Manufacturers in Vietnam indicated a marked reduction in production levels during July, thereby extending the current period of contraction to four months," HSBC said in a statement. "Anecdotal evidence widely pointed to unfavourable economic conditions and an unwillingness to spend among clients."

It noted that while lower workloads allowed firms to focus on reducing their volumes of unfinished business, the situation also forced them to trim their staffing levels.

"The sharp contraction of manufacturing activity reflects still weak domestic demand in Vietnam, as consumers are unwilling to spend and the credit environment remains challenging," said Trinh Nguyen, Asia Economist at HSBC. "The decline of employment and quantity of purchases suggests that the situation is likely to continue in the next couple of months."

Manufacturing data from other economies in Asia also deteriorated, adding evidence of a spreading global economic slowdown. Data released by HSBC showed India's PMI fell to 52.9 in July from 55 in June, South Korea from 49.4 to 47.2, Japan from 49.9 to 47.9, Singapore from 50.4 to 49.8 and Australia from 47.2 to 40.3.

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