The nation’s purchasing managers’ index continued to rise last month after the index hit a record high in more than two years in January, indicating substantial growth in the domestic manufacturing sector, a survey by HSBC said yesterday.
Supported by rising new orders, the headline index climbed to 62.5 last month, with both domestic and overseas demand reported to have improved, HSBC said in the survey.
“Taiwan’s economy has entered a sustained expansion cycle, with rising new orders pointing to further strength ahead,” Frederic Neumann, senior Asian economist with HSBC, said in a statement.
New export orders grew at their fastest pace in 30 months, while overall incoming new business saw its strongest expansion since December 2006, the report said.
“With global, as well as Asian, electronics demand expanding at a rapid clip, [Taiwan’s] economy looks set to expand this year at nearly 5 percent,” Neumann said.
Last month, the output of Taiwanese manufacturers increased substantially on growing global demand and at the fastest rate since October 2007, but HSBC said the output increase was still “insufficient to keep pace with new order growth.”
As a result, work backlogs in manufacturing companies rose last month and the extent to which outstanding business accumulated remained sharp, although it eased marginally from the series high posted in January, the report said.
In addition, higher output led employment in the manufacturing sector to grow “markedly” last month, posting an increase for the eighth straight month, HSBC said.
Because of rising raw material prices, inflationary pressure continued to build extensively last month, with input prices increasing at the fastest pace in recorded history, displacing last month’s high, it said.
“Recent numbers, however, suggest that input prices are rising at a considerable pace in Taiwan, which may herald broader inflationary pressures,” Neumann said, adding that the government could soon take measures to curb inflation.
“The authorities may therefore begin to tap on the breaks in the coming few months to prevent price pressures from escalating further,” he said.
A marked increase in output prices last month was also attributed to sustained input cost inflation, although strong competition for business prevented them from rising further, HSBC said.
Concerns over further rises in input costs led manufacturers to increase purchasing activity beyond the higher volumes already required to meet output growth, it said.
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