The nation’s purchasing managers index (PMI) rose for the seventh consecutive month to 57.5 points last month from 55.1 a month earlier, showing the strongest rate of expansion in the 22 months since November 2007, a report showed yesterday.
The PMI report, conducted by financial information services company Markit Economics for HSBC, provides a single-figure snapshot of the domestic manufacturing sector’s health.
The figures also signaled a marked expansion in the local manufacturing sector and marked the sixth straight month of sustained growth, HSBC said in a press statement.
New orders and output for the sector both jumped last month, while purchasing activity and employment also increased, however input costs rose considerably, putting pressure on margins.
“The continued rise in Taiwan’s PMI points to another quarter of strong sequential GDP growth. While new orders are climbing higher, driven mostly by exports, there are signs that the domestic economy is swiftly reviving as well,” Frederic Neumann, a senior Asian economist at HSBC, said in the statement.
A PMI reading above 50 signals an improvement in business conditions, while readings below that signal deterioration.
He added: “Most impressively, the employment component remains above 50 for the third month in a row, suggesting that firms continue to add jobs, likely heralding the end of rising unemployment rates.”
The nation’s employment index rose to 55.1 points last month, staying above the 50-point threshold since July, the report showed.
Neumann, however, warned that price pressures were also returning as companies reported both rising input and output prices.
This may signal that local manufacturers’ pricing power was returning, but also heralds growing inflation risk and possible monetary tightening next year, Neumann said.
The nation’s input and output prices index last month climbed to 50.2 and 67 points respectively, up from 48.6 and 60 from one month earlier.
The report also found that orders from overseas have had a substantial impact on the overall growth in new business, although the rate at which new export orders rose last month was largely unchanged from that recorded in August.
This indicated that improved domestic demand was the principal driver behind the overall increased rate of growth in new business, the report found.
The nation’s new orders and export orders index posted at 59.4 and 60.6 points last month respectively, up from 57.8 and 60.5 in August.
Despite increased production, backlogs continued to accrue last month, indicating insufficient production capacity.
This was underpinned through the sustained depletion of stocks of finished goods, but the pace of decline in stocks eased and was in line with the historical average, the report said.
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