The momentum is unlikely to increase in the near term.
New export orders, while improving, remained stuck at four-month lows, profit margins are starting to come under pressure as a result of weak demand while output prices contracted at a faster pace in November and the fall in input prices eased somewhat.
Renewed declines in the employment sub-component suggest that manufacturers are growing more cautious about adding headcount.
These developments support the view that export growth, which fell to 8.3 per cent year-on-year as of November from 8.5 per cent in October and 13.4 per cent in 2014, will likely slow further through the next quarter.
Data from the General Statistics Office show that the main drag on exports is coming from lower demand in the eurozone, Viet Nam's second biggest export market, ASEAN, and Japan.
Shipments to the US, which remains the top destination for Vietnamese goods, have slowed relative to 2014 but are still holding up at a robust 17.6 per cent. Meanwhile, exports to Korea have jumped 28.8 per cent in the first eleven months of 2015, reflecting FDI that has recently come online (in 2014, South Korea was the largest foreign investor in Viet Nam).
This is a reminder not to get overly pessimistic on Viet Nam's export outlook: as of November, year-to-date implemented FDI is at a record high of US$13 billion and could exceed $15 billion this year.
The new investments should boost Viet Nam's shipments, even if global demand remains weak.
As a result, exports are likely to expand by 13.1 per cent in 2016. Down the road recent trade liberalisation efforts should allow the country to continue capturing global market share, adding to the tailwinds for the manufacturing sector.
Nonetheless, the recent weakness in exports, especially on a value basis, has resulted in some investor concerns over the outlook for Viet Nam's external balance position.
Indeed, the merchandise trade deficit has worsened in 2015, standing at $4.6 billion as of November. A seasonal widening of the deficit in December is likely to push the full-year number to over $6 billion, up from $0.6 billion in 2014.
The widening trade deficit reflects the fact that imports have been outpacing exports. So imports merit a closer look. The good news is that a significant portion of the 13.7 per cent year-on-year increase in imports this year is associated with demand for capital equipment.
Machinery imports, for example, have remained robust in 2015 and are on track to expand at close to last year's 25 per cent pace.
The improved availability of credit, coupled with excitement over changes to Viet Nam's foreign ownership regulations, has also helped spark a revival in the property markets, especially in the big cities of Ha Noi, HCM City, Da Nang, and Hai Phong.
So far, the pick-up in lending to the real estate sector has been benign, running at 14.6 per cent year-on-year as of September, and far from resembles the speculative excesses that led to the collapse of the property market in 2008 and again in 2012.
The government and central bank are working proactively to reflate the property market since a recovery in real estate prices boosts banks' collateral values, helping Viet Nam's banking sector grow out of its bad debt problem.
The rising domestic demand is likely to stoke inflationary pressures in 2016. But thanks to lower global commodity prices, the average headline inflation looks likely to slow to a record low of 0.5 per cent in 2015 from 4.1 per cent last year.
However, the November CPI report offers tentative signs that inflation is beginning to bottom out: after briefly slipping into deflation in the early fall, headline inflation ticked up to 0.3 per cent y-o-y in November, driven by a smaller drag from energy prices and pick up in core inflation to 1.6 per cent y-o-y from 1.4 per cent.
This is not exactly cause for alarm at this stage. However, with strong growth likely to continue in the quarters ahead, inflation is expected to rebound to 3.1 per cent y-o-y by the end of H1 next year, partly on the back of base effects.
The rate is likely to accelerate to 4.9 per cent for the full year.
It also calls for the SBV to shift to a tightening mode next year, and deliver the first 50 basis-points hike in the third quarter, taking the open market operations (OMO) rate to 5.5 per cent.
