Faced with rising transportation costs and falling order growth in the wake of the anti-China riots, Vietnamese manufacturers raised their prices in June.
The price increases represented the first such hikes reported so far this year.
Concerns about the hikes were largely based on Vietnam's Purchasing Manager’s Index (PMI) -- a figure released by HSBC and Markit Economics based on new orders, output, employment, supplier delivery times, and stocks of items purchased.
Vietnam posted a PMI score of 52.3 in June after staying above the no-change mark of 50 for nine consecutive months, indicating a steady expansion in manufacturing.
However, that expansion slowed for the second consecutive month, from 52.5 in May and a record high of 53.1 in April.
The growth of new orders (including calls for exports) fell partly due to the riots in May, according to analysis provided by HSBC. Protests against China's illegal placement of a US$1-billion oil rig in Vietnam's waters erupted into violence directed at factories flying the Chinese flag in southern and central Vietnam.
Trinh Nguyen, Asia Economist at HSBC, said the “slight slowdown” is expected to be temporary.
“Given low inventories and robust new orders, we expect the sector to continue to perform well, especially as the impact from recent tensions fades.”
Following increasing demand, manufacturers continued to clear their inventories and finally decided to raise their prices for the first time since January, the strongest increase in 15 months.
Manufacturers attributed the price increases to new tonnage rules that require companies to make more trips to deliver the same amount of goods.
Many new highway weigh stations were put into operation in the middle of April to put a stop to rampant overloading.
While some firms had to hire more staff to meet new orders, others reported resignations.