HSBC Taiwan’s Purchasing Managers Index (PMI) shrank for the second straight month last month as external conditions deteriorated further for technology-driven exports, a survey by the global financial firm showed yesterday.
The PMI, a composite indicator to gauge the health of the manufacturing sector, fell to a 19-month low of 49.0 last month, from 49.2 a month earlier, the report said.
“Taiwan’s manufacturing engine is still fending off external turbulence as weak orders, especially export orders, dragged down output activity and the headline reading,” Donna Kwok (郭浩庄), HSBC economist on Greater China, said in a statement.
A reading above 50 means the industry is expanding while a score below the neutral level indicates contraction.
However, the pace of output decline eased, suggesting that manufacturing activity is about to find its feet, Kwok said. The output sub-index stood nearly flat at 47.3 last month, compared with 47 in August, the report said.
Taiwan is a heavy exporter of consumer electronics including semiconductors, flat panels and personal computers.
Manufacturers reported a reduction in new order volumes last month, pushing the sub-index of new export orders down by the fastest pace since January last year to 45.3, from 48.1 a month earlier, the survey indicated.
New total orders contracted by a lesser degree to 49.6 last month, from 49.4 in August, according to the survey.
Kwok attributed the readings to depressed overseas demand.
“Respondents flagged that underlying weakness still lingers in the global economy, keeping purchasers on edge, resulting in depressed export orders, especially from China and Europe,” she said.
Likewise, the sub-index of work backlogs fell to 48.1 last month, from 51.9 in August, indicating a degree of spare capacity at manufacturing companies in Taiwan, the survey said.
Despite weaker output activity and new business inflows, employment continued to improve, remaining above the neutral mark for the 16th consecutive month at 52.1 last month, from 53 one month earlier, the survey showed.
The increasing job pool lent support to expectations that private consumption may help sustain the economy amid slowing exports for the rest of the year.
The latest PMI data prompted HSBC to believe the central bank will pause its interest rate normalization process.
“Taiwan needs the global tech cycle to pick up ... The [world’s] lead indicators suggest it is not about to happen just yet,” Kwok said. “The central bank will halt interest rate hikes until the second quarter of 2011 when the external outlook should be clearer.”
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