Taiwan’s manufacturing activity slowed last month, but nevertheless remained healthy as demand from the US eased and supply-chain disruptions following Japan’s March 11 earthquake and tsunami continued to weigh on the industry, according to an HSBC PLC report released yesterday.
The HSBC purchasing managers’ index (PMI), a leading indicator used to gauge the health of the nation’s manufacturing sector, fell to a five-month low of 54.9 last month, from 58.2 in April, the monthly report showed.
“Demand is slowing in response to two things,” said Donna Kwok (郭浩庄), an economist at HSBC Asia.
“Temporary supply disruptions triggered by the recent natural disaster in Japan and a global inventory correction led by the United States will hit Asia’s trade-dependent markets hard,” the economist said.
A PMI score above 50 indicates expansion while readings below suggest a contraction.
Kwok expects the landscape to turn nastier in the months ahead, but added that “the easing is in moderation, it’s not hard landing.”
Of the component measures, the sub-index on total new orders cooled to 55.2 last month, the slowest pace since November last year and compared with 57.8 a month earlier, the HSBC report said.
Kwok attributed that to less aggressive inventory-building among local and foreign buyers.
RECOVERY CONTINUES
The sub-index on new export orders eased to 55.6 in May, from 58.0 in April, on strong demand from China, Southeast Asia and Europe, the report said, suggesting the global economic recovery continues.
Both input and output price indexes moderated to their lowest levels since November of last year, printing 59.5 and 54.9 last month, from 77.1 and 57.0 respectively one month earlier, the report found.
“The readings, while above the expansionary threshold, suggest cost burdens on manufacturers have eased up significantly,” Kwok said.
INFLATION PRESSURES
Kwok said that manufacturers have been reluctant to pass inflationary pressures on to consumers.
The employment sub-index stood at 52.2 last month, slowing from 55.6 in April, indicating Taiwan’s job market recovery remains on track.
Against this backdrop, the central bank is likely to continue with its cautious normalization of the nation’s monetary policy by raising interest rates by 12.5 basis points when it convenes for its quarterly board meeting later this month, Kwok said.
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