The manufacturing sector continued to grow last month for the ninth consecutive month, but the pace of expansion was slightly slower than the previous month, a purchasing managers’ index (PMI) report showed yesterday.
The manufacturing PMI was 58.4 points last month, supported by an increase in new-order volume, HSBC Taiwan said in an e-mailed statement, citing a report conducted by financial information services company Markit Group Ltd.
A figure above 50 signals a business expansion in the sector, while a figure less than 50 means a contraction.
Last month’s figure, however, was lower than the two-year high of 59.8 points registered in October, suggesting that the manufacturing sector was undertaking a consolidation following the strong recovery seen over the past eight months, the report said.
“Taiwan’s economy is finishing the year on a strong note. While activity appears to have slowed sequentially over the last month, output is still expanding and we expect another strong GDP reading for the fourth quarter,” Frederic Neumann, senior Asian economist at HSBC, said in the statement.
Taiwan’s economy contracted less than expected — 1.29 percent year-on-year — in the third quarter, the government’s statistics bureau reported last week.
The economy is likely to grow 6.89 percent in the fourth quarter to end five straight quarters of contraction, the Directorate-General of Budget, Accounting and Statistics said on Thursday.
HSBC Taiwan’s PMI is a composite gauge of 11 sub-indexes — new orders, export orders, backlogs, stocks of finished goods and employment among them — that offers a snapshot of the manufacturing sector.
The report showed growth in new-order volume and export orders both eased slightly last month from the previous month, although they remained robust.
While the rate of increase in backlogs eased, suggesting production capacity remained under pressure, manufacturers continued their effort to increase production and therefore helped boost employment for the fifth month in a row, the report said.
“A strong recovery in the employment index suggests that domestic demand remains buoyant and firms [remain] confident about the further demand follow-through,” Neumann said.
The report showed pricing pressure continued to build in the sector, with input prices rising more substantially than output prices because of the cost of raw materials.
Nevertheless, strong competition and pressure from consumers seeking discounts has prevented manufacturers from passing on the cost increases in full, HSBC said.
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